B-155281, OCT. 29, 1964

B-155281, OCT. 29, 1964

TO ARCON, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF SEPTEMBER 28, 1964, CONCERNING THE AWARD OF A LEASE FOR THE REGIONAL OFFICE HEADQUARTERS FOR THE UNITED STATES POST OFFICE DEPARTMENT AT SAN FRANCISCO, CALIFORNIA. SPECIFICALLY, YOU REQUESTED THAT THE AWARD BE HELD IN ABEYANCE PENDING A COMPLETE AUDIT OF BID PROCEDURES, BID FIGURES AND REVIEW OF ALL RECOMMENDED REPORTS BY OUR OFFICE AND THAT THE AWARD BE MADE ON THE BASIS OF ETHICAL BID PROCEDURES AND LOWEST OVERALL COST TO THE GOVERNMENT.

BY ADVERTISEMENT FOR BIDS TO LEASE, DATED APRIL 20, 1964, THE POST OFFICE DEPARTMENT, ACTING UNDER AUTHORITY FOUND AT 39 U.S.C. 2102, SOLICITED BIDS FOR 35,000 NET SQUARE FEET OF SPACE FOR POSTAL PURPOSES.

BIDDERS WERE ADVISED BY THE ADVERTISEMENT THAT IMPORTANT FACTORS WOULD INCLUDE LOCATION, SERVICE CONSIDERATION, ECONOMIC FACTORS, AND OVERALL OPERATING COSTS. BIDS WERE TO BE SUBMITTED ON A TEN-YEAR STRAIGHT LEASE BASIS AND BIDDERS WERE ADVISED THAT THE STIPULATED ANNUAL GROSS RENTAL SHOULD INCLUDE ALL SERVICES, TAXES, UTILITIES, FULL JANITORIAL SERVICE AND MAINTENANCE.

THE ADVERTISEMENT INFORMED THE BIDDERS THAT:

"ANY AWARD MADE UNDER THIS ADVERTISEMENT WILL BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. THE POST OFFICE DEPARTMENT RESERVES THE RIGHT TO NEGOTIATE FURTHER WITH BIDDERS FOR BETTER TERMS, OR TO SECURE OFFERS ON SUITABLE PROPERTIES, IN ADDITION TO THOSE SUBMITTED IN RESPONSE TO THE ADVERTISEMENT. THE POST OFFICE DEPARTMENT RESERVES THE RIGHT AFTER THE CLOSING DATE, TO REJECT ANY OR ALL BIDS, OR TO NEGOTIATE WITH BIDDERS FOR CLARIFICATION OF AMBIGUITIES OR OTHER DESIRABLE MODIFICATIONS IN THE PROPOSALS.'

EIGHT PROPOSALS WERE RECEIVED IN RESPONSE TO THE ADVERTISEMENT AND ON THE BASIS OF THE INITIAL SUBMISSION ARCON APPARENTLY WAS THE LOW BIDDER WITH A RENTAL OF $125,000 PER ANNUM. HOWEVER, 180 NEW MONTGOMERY CORPORATION WHICH ORIGINALLY HAD SUBMITTED A BID OF $151,284 PER ANNUM SUBMITTED A REVISED BID OF $125,000 PER ANNUM. ALSO, ARCON SUBMITTED A REVISED BID AND THAN A FURTHER REVISED BID ON ITS SPACE. A SUMMARY COMPARISON OF THESE TWO BIDS AS THEY NOW STAND AS REPORTED BY THE DEPARTMENT IS AS FOLLOWS:

TABLE NAME OF BIDDER ARCON, INC. 180 NEW MONTGOMERY

CORPORATION LOCATION 631 HOWARD STREET 180 NEW MONTGOMERY ST. SQUARE FOOTAGE 30,595 30,865 BASIC LEASE TERM 10 YEARS 10 YEARS RENEWAL OPTION 1 5-YEAR AT SAME RENTAL NONE REVISED ANNUAL RENTAL $112,000 $125,000 OPERATING COSTS NO ESCALATION CLAUSE ESCALATION CLAUSE AVAILABILITY 4/1/65 1/31/65 TAX CLAUSE 40 PERCENT OF EXCESS 25 PERCENT OF EXCESS OVER

OVER $37,000 1ST YR.'S FULL TAX PARKING SPACE 5

5

THE POST OFFICE DEPARTMENT HAS REPORTED THAT IT WAS SEEKING APPROXIMATELY 35,000 SQUARE FEET OF OFFICE SPACE IN THE BUSINESS DISTRICT OF SAN FRANCISCO; THAT IT CONTEMPLATED OBTAINING A LEASE WHICH WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED; AND THAT THE PRICE OF THE SPACE, WHILE ALWAYS A MAJOR FACTOR IN ANY OF ITS LEASING OPERATIONS COULD NOT BE THE ONLY CONSIDERATION BECAUSE OF THE MANY OTHER FACTORS INVOLVED, INCLUDING LOCATION, SERVICE CONSIDERATIONS, OVERALL OPERATING COSTS AND ECONOMIC FACTORS, ALL AS POINTED OUT IN THE ADVERTISEMENT FOR BIDS. THE DEPARTMENT HAS REPORTED FURTHER THAT AS OF OCTOBER 14, 1965, NO AWARD HAD BEEN MADE. THE DEPARTMENT HAS EXPRESSED THE VIEW, HOWEVER, THAT IT IS LEGALLY AUTHORIZED TO EXERCISE ITS ADMINISTRATIVE DISCRETION AND AWARD A LEASE CONTRACT FOR THE REQUIRED SPACE TO THE BIDDER WHOSE FINAL OFFER IS IN THE BEST INTERESTS OF THE GOVERNMENT AFTER CONSIDERATION OF ALL PERTINENT FACTORS.

IT IS PROVIDED AT 39 U.S.C. 2102 THAT:

"/A) NOTWITHSTANDING ANY OTHER PROVISION OF LAW THE POSTMASTER GENERAL MAY LEASE, ON WUCH TERMS AS HE DEEMS APPROPRIATE, REAL PROPERTY NECESSARY IN THE CONDUCT OF THE AFFAIRS OF THE DEPARTMENT.

"/B) THE TERM OF A LEASE MAY NOT EXCEED TWENTY YEARS WHEN MADE FOR QUARTERS---

"/1) FOR POST OFFICES OF THE FIRST, SECOND AND THIRD CLASSES; "

IF THIS PROJECT HAD BEEN ADVERTISED FOR ACQUISITION PURSUANT TO 39 U.S.C. 2103 (A) AS IMPLEMENTED BY 39 U.S.C. 2112 (2) REQUIRING CONSUMMATION OF LEASE AGREEMENTS IN ACCORDANCE WITH THE ADVERTISING REQUIREMENTS OF 41 U.S.C. 5, AWARD COULD HAVE BEEN MADE ONLY TO A RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID. AS INDICATED ABOVE, HOWEVER, THE ADVERTISEMENT FOR BIDS WAS MADE UNDER AUTHORITY OF 39 U.S.C. 2102 AND THE BIDDERS WERE CLEARLY ADVISED THAT THE DEPARTMENT RESERVED THE RIGHT TO NEGOTIATE FURTHER WITH BIDDERS FOR BETTER TERMS, TO REJECT ANY OR ALL BIDS, OR TO NEGOTIATE WITH BIDDERS FOR CLARIFICATION OF AMBIGUITIES OR OTHER DESIRABLE MODIFICATIONS IN THEIR PROPOSALS.

WE HAVE HELD THAT STATUTES GRANTING AUTHORITY TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING, SUCH AS 39 U.S.C. 2102, COMPREHEND THE LESSER AUTHORITY TO UTILIZE ADVERTISING TO THE EXTEND ADMINISTRATIVELY DEEMED APPROPRIATE IN MAKING CONTRACTS THEREUNDER, WITHOUT RESTRICTING FINAL ADMINISTRATIVE DETERMINATION OF THE BIDDER TO WHOM THE CONTRACT SHOULD BE AWARDED. 20 COMP. GEN. 194. AS POINTED OUT IN THE CITED DECISION, IN SUCH CASES AN ADMINISTRATIVE ELECTION TO ADVERTISING RATHER THAN TO NEGOTIATE WITH A SINGLE CONTRACTOR DOES NOT NECESSARILY REQUIRED THE MAKING OF AN AWARD TO THE LOWEST BIDDER REGARDLESS OF ANY OR ALL OTHER CONSIDERATIONS. OUR OFFICE HAS HELD THAT THE DEPARTMENT HAS THE RIGHT TO NEGOTIATE LEASES FOR PERIODS NOT TO EXCEED 20 YEARS UNDER 39 U.S.C. 2102 (FORMERLY 39 U.S.C. 794 (F) ). SEE 36 COMP. GEN. 48; B-120598, NOVEMBER 17, 1954.

THE SOLICITATION OF BIDS UNDER THE CIRCUMSTANCES HERE INVOLVED WITH THE EXPRESS RESERVATION OF THE RIGHT TO REJECT ANY AND ALL PROPOSALS AND TO NEGOTIATE FURTHER WITH QUALIFIED BIDDERS CANNOT BE REGARDED AS IMPOSING ON THE DEPARTMENT ANY OBLIGATION TO ACCEPT THE LOSES, OR ANY OTHER OF THE BIDS RECEIVED. ON THE OTHER HAND, IN VIEW OF THE EXPRESS AUTHORITY GRANTED THE POSTMASTER GENERAL IN 39 U.S.C. 2102, WHICH PERMITS NEGOTIATION WITHOUT REGARD TO THE RULES OF FORMALLY ADVERTISED COMPETITIVE BIDDING, ANY AWARD THAT MIGHT BE MADE IN THIS INSTANCE WOULD BE A MATTER WITHIN THE DISCRETION OF THE POST OFFICE DEPARTMENT AND IN THE ABSENCE OF A SHOWING OF A FAILURE ON THE PART OF THE OFFICIALS OF THE DEPARTMENT TO EXERCISE THEIR BEST JUDGMENT IN MAKING AN AWARD, OUR OFFICE WOULD NOT BE JUSTIFIED IN OBJECTING TO SUCH AN AWARD. THEREFORE, THERE APPEARS TO BE NO PROPER BASIS FOR ANY ACTION BY OUR OFFICE IN THE MATTER.