B-157297, SEP. 17, 1965

B-157297, SEP. 17, 1965

TO ALCOR, INC.:

IN YOUR TELEGRAM AND LETTER DATED JULY 21, 1965, YOU PROTEST THE NAVAL AIR ENGINEERING CENTER'S AWARD OF A CONTRACT PURSUANT TO INVITATION FOR BIDS (IFB) NO. 156-651-65 FOR CONDUCTING TESTS ON GOVERNMENT-FURNISHED OIL SAMPLES.

AN EARLIER INVITATION FOR BIDS FOR THESE SERVICES, IFB 156-528-65, WAS ISSUED ON APRIL 16, 1965. ON MAY 17, 1965, BID OPENING DISCLOSED THE FOLLOWING TOTAL PRICES OF THE THREE FIRMS WHICH SUBMITTED BIDS FOR TESTING THE VARIOUS SAMPLES:

TABLE

ALCOR, INC. $5,421.00

PHOENIX CHEMICAL LABORATORY, INC. 6,091.80

SOUTHWEST RESEARCH INSTITUTE 8,138.00

IT IS REPORTED THAT THE PROCURING ACTIVITY HAD INTENDED TO REQUEST BIDS ON AN "INDEFINITE QUANTITY BASIS," AND TO ORDER SERVICES AS REQUIRED DURING THE YEAR, UP TO THE MAXIMUM QUANTITY OF TESTS STATED IN THE INVITATION. TO THIS END, PAGE 16 OF THE INVITATION INCLUDED THE FOLLOWING LANGUAGE:

"ORDERS FOR DELIVERY: (INDEFINITE QUANTITY CONTRACTS)

AN "ORDER FOR DELIVERY" WILL BE ISSUED AS REQUIRED BY SUPPLY OFFICER, NAVAL AIR ENGR CENTER BLDG. 76, PHILA., PA., 19112. EACH ORDER WILL BE NUMBERED CONSECUTIVELY AND WILL INCLUDE THE DATE OF THE ORDER . . . IDENTIFICATION OF LUBRICATING OIL, QUANTITY OF OIL TO BE FURNISHED, AND TIME WITHIN WHICH IT WILL BE FURNISHED.'

THE DELIVERY SCHEDULE REQUIRED THAT THE TESTING REPORT BE FURNISHED WITHIN TWO WEEKS AFTER RECEIPT OF GOVERNMENT-FURNISHED MATERIAL.

AFTER THE BIDS HAD BEEN OPENED, THE PROCURING ACTIVITY DISCOVERED THAT AS A RESULT OF AN ERROR IN PREPARING IFB 156-528-65, THE INVITATION DID NOT INCLUDE APPROPRIATE CLAUSES WHICH WOULD HAVE ESTABLISHED THAT THE CONTRACT WAS TO BE AN "INDEFINITE QUANTITY" TYPE PERMITTING THE GOVERNMENT TO ISSUE ORDERS, WITHIN A STATED PERIOD, AS THE NEED AROSE. THE OMITTED CLAUSES WOULD HAVE READ AS FOLLOWS:

"INDEFINITE QUANTITIES AND DURATION OF CONTRACT:

THE TOTAL QUANTITIES SPECIFIED HEREIN ARE ESTIMATES ONLY. THE AMOUNTS WHICH THE CONTRACTOR MAY BE REQUIRED TO FURNISH AND THE GOVERNMENT TO ACCEPT HEREUNDER SHALL BE THE AMOUNTS WHICH SHALL FROM TIME TO TIME BE ORDERED HEREUNDER BY THE GOVERNMENT DURING THE ORDERING PERIOD OF THIS CONTRACT. IN ANY EVENT, HOWEVER, THE GOVERNMENT SHALL ORDER SUPPLIES HEREUNDER HAVING AN AGGREGATE VALUE AT THE UNIT PRICES SPECIFIED HEREIN OF NOT LESS THAN $1.00; AND THE GOVERNMENT SHALL BE ENTITLED TO ORDER AND THE CONTRACTOR SHALL BE REQUIRED TO FURNISH SUPPLIES HEREUNDER AMOUNTING TO NOT MORE THAN THE TOTAL ESTIMATED QUANTITIES SET FORTH HEREIN. IF THE GOVERNMENT ORDERS AND THE CONTRACTOR FURNISHES MORE THAN THE FOREGOING MAXIMUM AMOUNT, THE TOTAL QUANTITY ORDERED AND FURNISHED SHALL BE TREATED FOR ALL PURPOSES AS HAVING BEEN ORDERED AND FURNISHED UNDER THE TERMS OF THIS CONTRACT AND PAYMENT THEREFOR SHALL BE MADE AT THE UNIT CONTRACT PRICE OF PRICES.

"DURATION OF CONTRACT:

THE CONTRACT SHALL BECOME EFFECTIVE ON DATE OF CONTRACT AND SHALL BE APPLICABLE TO ALL ORDERS PLACED HEREUNDER UNTIL THE PERIOD ENDING ONE YEAR AFTER DATE OF CONTRACT.'

AFTER DISCOVERING ITS ERROR, THE PROCURING ACTIVITY TELEPHONED A REPRESENTATIVE OF YOUR FIRM TO ADVISE HIM OF THE GOVERNMENT'S OVERSIGHT. THE REPRESENTATIVE WAS ASKED IF HE WOULD ACCEPT A CONTRACT ON AN INDEFINITE BASIS UNDER THE INSTANT SOLICITATION IF SUCH A CONTRACT WERE TENDERED TO HIM. THE REPRESENTATIVE SAID YES.

SUBSEQUENT TO THE ABOVE CONVERSATION, THE PROCURING ACTIVITY DECIDED THAT THE INVITATION AND THE LOW BID OF ALCOR COULD NOT PROPERLY BE MODIFIED IN THE MANNER CONTEMPLATED, APPARENTLY BECAUSE SUCH PROCEDURE WAS THOUGHT TO AFFORD THE LOW BIDDER "TWO BITES AT THE APPLE.' ACCORDINGLY, THE INVITATION WAS CANCELLED, ALL BIDS WERE REJECTED, AND ON JUNE 17, 1965, THE REQUIREMENT WAS READVERTISED BY IFB 156-651-65. THE NEW INVITATION INCLUDED THE TWO CLAUSES QUOTED ABOVE. BID OPENING ON JULY 2, 1965, DISCLOSED THE FOLLOWING PRICES OF THE THREE BIDDERS:

TABLE

PHOENIX CHEMICAL LABORATORY, INC. $5,356

ALCOR, INC. 5,421

SOUTHWEST RESEARCH INSTITUTE 8,138

A CONTRACT PURSUANT TO THE SECOND INVITATION WAS ISSUED TO PHOENIX LABORATORY, INC., ON JULY 18, 1965.

YOU SAY YOU CONSIDERED THE ISSUANCE OF THE SECOND INVITATION TO BE A FORMALITY AND ASSUMED THAT THE CONTRACT WAS YOURS. YOU MAINTAIN THAT THE PROCURING ACTIVITY SHOULD HAVE ACCEPTED YOUR LOW BID, AS MODIFIED, UNDER THE FIRST INVITATION.

IT IS NOT NECESSARILY IN THE GOVERNMENT'S BEST INTEREST TO ACCEPT A LOW BIDDER'S OFFER TO MODIFY HIS BID SO THAT IT CONFORMS WITH MATERIAL REQUIREMENTS NOT STATED IN THE INVITATION. SEE, E.G., B-154217, DATED JUNE 30, 1964. HOWEVER, IN THE CITED DECISION, WE RECOGNIZED THE ESTABLISHED PROPOSITION THAT OFFERS BY A LOW RESPONSIVE BIDDER OF TERMS MORE FAVORABLE TO THE GOVERNMENT MAY BE ACCEPTED WHERE THE BENEFIT RUNS SOLELY TO THE GOVERNMENT. BY THE SAME TOKEN, WHERE COMPETITION HAS NOT BEEN AFFECTED, WHERE THE AGENCY BY AWARD WOULD ENTER INTO A BINDING CONTRACT FOR WHAT IT WANTED, AND WHERE NO BIDDER OBTAINED AN OPTION OR OTHER UNDUE ADVANTAGE BECAUSE OF THE DEFECT IN THE INVITATION, WE HAVE, INSTEAD OF REQUIRING THAT THE PROCUREMENT BE READVERTISED, PERMITTED AWARD UNDER THE INVITATION WITH THE OMISSION OR CORRECTION OF THE PROVISION WHICH DID NOT CORRECTLY STATE THE GOVERNMENT'S ACTUAL NEED OR INTENTION. SEE B-151745, DATED JULY 2, 1963, 43 COMP. GEN. 23, 26, AND CASES CITED, ESPECIALLY 39 COMP. GEN. 834, WHERE WE DID NOT OBJECT TO A PROPOSED AWARD PURSUANT TO A DEFECTIVE INVITATION UNDER WHICH THE LOWEST TIMELY BIDDER OFFERED TO RELINQUISH THE OPTION IN THE INVITATION TO SUPPLY WHITE OR YELLOW CLOTH, AND AGREED TO SUPPLY ONLY THE YELLOW (AND MORE EXPENSIVE) CLOTH IN CONFORMITY WITH ACTUAL REQUIREMENTS, AT NO ADDITIONAL COST.

WE THINK AN ACCEPTANCE BY THE CONTRACTING OFFICER OF YOUR OFFER TO WAIVE THE RIGHT TO PERFORM THE SPECIFIC NUMBER OF TESTING SERVICES STATED IN THE INVITATION, WHICH WOULD HAVE ARISEN UPON ACCEPTANCE OF YOUR UNMODIFIED BID, AND TO ENTER INTO THE CONTRACT ON AN INDEFINITE QUANTITY BASIS, AT NO EXTRA COST, WOULD HAVE BEEN CONSISTENT WITH THE PRINCIPLES EXPRESSED ABOVE. HOWEVER, PARAGRAPH 8 (B) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS PUT BIDDERS ON NOTICE OF THE GOVERNMENT'S RIGHT TO REJECT ALL BIDS. MOREOVER, THE READVERTISEMENT OF THE REQUIREMENT CANNOT BE CONSIDERED MERELY AS A FORMALITY, BUT MUST BUT REGARDED AS CLEAR EVIDENCE THAT THE GOVERNMENT INTENDED TO AWARD A CONTRACT TO THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER ON THE NEW INVITATION, WHICH IN FACT WAS ON A MATERIALLY DIFFERENT BASIS. SEE PARAGRAPH 8 (A) OF THE TERMS AND CONDITIONS OF THE IFB. ANY COMPLAINT TO THIS OFFICE AGAINST READVERTISING OF A REQUIREMENT AFTER CANCELLATION OF A PRIOR INVITATION SHOULD BE MADE ON OR BEFORE THE TIME SET FOR BID OPENING UNDER THE READVERTISEMENT. OTHERWISE, THE ACTIVITY MAY PROCEED UNDER THE SECOND INVITATION, AS IT DID IN THIS CASE, TO AWARD A PRESUMABLY VALID CONTRACT TO A GOOD FAITH BIDDER.

UNDER THE CIRCUMSTANCES, WE FIND NO LEGAL BASIS FOR OBJECTING TO THE CONTRACT AWARDED FOR THESE SERVICES, AND THEREFORE MUST REFUSE TO DIRECT COMPLIANCE WITH YOUR REQUEST THAT THE REQUIREMENT BE SATISFIED BY AWARDING A CONTRACT TO YOUR FIRM UNDER THE CANCELLED INVITATION.