B-164639, B-164640, NOVEMBER 12, 1968, 48 COMP. GEN. 306

B-164639, B-164640, NOVEMBER 12, 1968, 48 COMP. GEN. 306

BIDS - QUALIFIED - DESCRIPTIVE LITERATURE - VOLUNTEERED A BID ON AUTOMOTIVE INFRARED EXHAUST GAS ANALYSIS SYSTEMS WHICH INCLUDED UNSOLICITED DESCRIPTIVE LITERATURE THAT DID NOT CONFORM TO THE SPECIFICATIONS, BUT AN ACCOMPANYING LETTER CONSIDERED PART OF THE BID OFFERED TO MEET THE SPECIFICATIONS, IS A RESPONSIVE BID WHERE THE UNSOLICITED NONRESPONSIVE DESCRIPTIVE LITERATURE DID NOT QUALIFY THE BID OR AFFECT THE GOVERNMENT'S RIGHT TO REQUIRE CONFORMITY WITH THE SPECIFICATIONS. ABSENT A QUALIFICATION IN THE BID, COMPLIANCE WITH THE SPECIFICATIONS DETERMINATIVE ON THE BASIS OF THE PRODUCT AND NOT ON THE SPECULATIVE INTERPRETATIONS OF THE UNSOLICITED DESCRIPTIVE LITERATURE, THE ACCEPTANCE OF A NOISE LEVEL IN THE SYSTEMS AS A MINOR DEVIATION, CORRECTION OF WHICH WOULD HAVE A NEGLIGIBLE EFFECT ON PRICE WAS WITHIN THE PROVINCE OF THE CONTRACTING AGENCY. BIDS - EVALUATION - DISCOUNT PROVISIONS - DEVIATION FROM TERMS OF INVITATION A BID SPECIFYING "ALL SALES ARE PAYABLE NET 30 FOLLOWING DATE OF INVOICE" IN RESPONSE TO AN INVITATION PROVIDING FOR THE INSERTION OF ANY DESIRED DISCOUNT IN ONE OR MORE OF THE BLANKS PRECEDING THE WORDS "PERCENT 10 CALENDAR DAYS," "PERCENT 20 CALENDAR DAYS," "PERCENT 30 CALENDAR DAYS," AND "PERCENT -- CALENDAR DAYS" IS A RESPONSIVE BID, THE TERM MEANING THAT THE GOVERNMENT WILL NOT BE ALLOWED ANY DISCOUNT AND THAT PAYMENT IS EXPECTED WITHIN 30 DAYS FOLLOWING DATE OF INVOICE--- AN EXPECTATION WHICH IS NOT CONTRARY TO THE TERMS OF PAYMENT INCLUDED IN THE STANDARD TERMS OF THE CONTRACT. ALSO THE INSERTION OF THE WORLD "NET" IN THE "PERCENT 30 CALENDAR DAYS" SPACE OF THE INVITATION NEITHER VARIED THE LANGUAGE OF THE BID NOR IMPOSED GREATER OBLIGATION ON THE GOVERNMENT THAN THE TERMS OF THE "PAYMENTS" PROVISION OF STANDARD FORM 32. CONTRACTS - PAYMENTS - WITHHOLDING - GOVERNMENT'S RIGHT RESTRICTED THE ACCEPTANCE OF A LOW BID CONTAINING THE PROVISION THAT "NO WITHHOLDING WILL BE ALLOWED WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER"--- A CONDITION WHICH NOT AFFECTING PRICE, QUANTITY, QUALITY, OR DELIVERY COULD HAVE BEEN DELETED PURSUANT TO SECTION 1-2.404-2/B) OF THE FEDERAL PROCUREMENT REGULATIONS--- CONSUMMATED A VALID AND ENFORCEABLE CONTRACT THAT DOES NOT DIMINISH THE GOVERNMENT'S RIGHT TO WITHHOLD MONIES UNDER THE "DEFAULT" PROVISION OF THE CONTRACT, THE CONTRACT WORK HOURS STANDARDS ACT, THE WALSH-HEALEY ACT, THE INTERNAL REVENUE LAWS, AND THE GOVERNMENT'S COMMON-LAW RIGHT AS A CREDITOR. SHOULD MONIES BE WITHHELD AND THE CONTRACTOR SUE, THE GOVERNMENT COULD ASSERT A CLAIM EITHER AS A CROSS- CLAIM OR AS A SEPARATE ACTION.

TO STRASSER, SPIEGELBERG, FRIED, FRANK AND KAMPELMAN, NOVEMBER 12, 1968:

REFERENCE IS MADE TO YOUR TWO LETTERS OF JUNE 20, 1968, AND SUBSEQUENT CORRESPONDENCE, PROTESTING ON BEHALF OF QATRON CORPORATION AGAINST AWARD TO ANY OF FOUR LOWER BIDDERS UNDER INVITATIONS FOR BIDS (IFB) NOS. 68-39 AND 68-43, ISSUED BY THE NATIONAL AIR POLLUTION CONTROL ADMINISTRATION, PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE.

BOTH PROCUREMENTS WERE FOR AUTOMOTIVE INFRARED EXHAUST GAS ANALVSIS SYSTEMS. IFB 68-39 CALLED FOR TWO SUCH SYSTEMS WITH RECORDERS AS PART OF THE ITEM. ITEM 1 OF IFB 68-43 WAS FOR FOUR SUCH SYSTEMS WITHOUT RECORDERS, AND ITEM 2, AN OPTIONAL ITEM, SOLICITED FOUR RECORDERS FOR USE WITH THE SYSTEMS ON ITEM 1. THE IFB PROVIDED THAT AWARD, IF THE GOVERNMENT ELECTED TO PROCURE ITEM 2, WOULD BE MADE TO THE LOW AGGREGATE BIDDER FOR ITEMS 1 AND 2. SEVEN BIDS WERE RECEIVED IN RESPONSE TO IFB 68- 43 AND EIGHT IN RESPONSE TO IFB 68-39. QATRON WAS FIFTH LOW BIDDER UNDER BOTH IFB-S. YOU ENUMERATE SEVERAL REASONS WHY THE FOUR LOW BIDDERS WHO WERE LOWER THAN QATRON ARE NONRESPONSIVE. HOWEVER, SINCE ALL BUT MINE SAFETY APPLIANCES COMPANY (MSA), THE SUCCESSFUL BIDDER, WERE DECLARED NONRESPONSIVE, WE WILL CONFINE OUR DISCUSSION TO YOUR ALLEGATIONS CONCERNING MSA'S RESPONSIVENESS.

YOU POINT OUT THAT THE BID PRICE FOR MSA WAS TYPED ON A COMPANY BID FORM WHICH INCLUDED THE FOLLOWING STATEMENT: ALL SALES ARE PAYABLE NET 30 FOLLOWING DATE OF INVOICE. NO WITHHOLDING WILL BE ALLOWED WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER.

IT IS YOUR POSITION THAT THE QUOTED LANGUAGE IS A MATERIAL DEVIATION FROM THE TERMS OF THE INVITATION AND RENDERS MSA'S BID NONRESPONSIVE. ADDITIONALLY, YOU STATE THAT MSA'S BID INCLUDED DESCRIPTIVE LITERATURE ON THE LIRA MODEL 200 ANALYZER WHICH IT PROPOSED TO USE, TO THE EFFECT THAT THE ANALYZER HAD A STATED RESPONSE OF 90 PERCENT OF FINAL READING IN 5 SECONDS WHICH IS CONTRARY TO THE SPECIFICATION REQUIREMENT OF ONE SECOND FOR 90 PERCENT RESPONSE. SUBSEQUENT TO AWARD YOU INTRODUCED AN ADDITIONAL BASIS FOR NONRESPONSIVENESS. YOU STATED THAT MSA WAS NONRESPONSIVE BECAUSE THE NOISE LEVEL PERFORMANCE SPECIFICATION CONTAINED IN MSA BULLETIN NO. 0705-12, EXHIBITS I AND II, SECTION 1, STATES A FACTOR OF "LESS THAN 1 PERCENT OF FULL SCALE" WHEREAS THE SPECIFICATIONS CALL FOR A NOISE LEVEL OF "LESS THAN .5 PERCENT OF FULL SCALE.'

THE ADMINISTRATIVE FILE SHOWS THAT MSA'S BID WAS ACCOMPANIED BY A LETTER DATED JUNE 14, 1968, WHICH STATED: THE LIRA M-200 INFRARED ANALYZER WILL BE SUPPLIED FOR THIS APPLICATION. IT WILL BE MODIFIED TO MEET THE SPEED OF RESPONSE REQUIREMENTS AS OUTLINED ON THE SOLICITATION BUT IN ALL OTHER RESPECTS WILL MEET OR EXCEED THE SPECIFICATIONS ON THE ATTACHED BULLETIN.

BASED ON THE OFFER TO MODIFY THE SPEED OF RESPONSE OF THE OFFERED EQUIPMENT TO MEET THE SPECIFICATIONS, THE BID OF MSA WAS CONSIDERED RESPONSIVE. APPARENTLY THE LIRA M-200 CONFORMED TO THE SPECIFICATIONS IN ALL RESPECTS, EXCEPT FOR THE SPEED RESPONSE REQUIREMENTS. BY THE LETTER OF JUNE 14, 1968, WHICH BECAME A PART OF ITS BID, MSA OFFERED TO MODIFY THE LIRA M-200 SO AS TO MEET THE SPEED RESPONSE REQUIREMENTS OF THE SPECIFICATIONS, AND CLEARLY INDICATED ITS INTENTION TO CONFORM TO THE SPECIFICATIONS. INASMUCH AS DESCRIPTIVE LITERATURE WAS NOT REQUIRED BY THE INVITATION, WE DO NOT BELIEVE THAT DISCREPANCY BETWEEN THE SPECIFICATIONS AND THE DESCRIPTIVE MATERIAL WHICH WAS FURNISHED SHOULD BE CONSTRUED AS A QUALIFICATION OF ITS EXPRESSED INTENTION, OR THAT IT WOULD AFFECT THE GOVERNMENT'S RIGHT TO REQUIRE CONFORMITY TO THE SPECIFICATIONS. CONSEQUENTLY, MSA'S BID CANNOT BE CONSIDERED AS NONRESPONSIVE ON THIS BASIS.

CONCERNING THE NOISE LEVEL PERFORMANCE, THE PROCURING ACTIVITY HAS FURNISHED A REPORT FROM THE CHIEF, CERTIFICATION AND SURVEILLANCE SECTION, NATIONAL AIR POLLUTION CONTROL ADMINISTRATION, TO THE EFFECT THAT QUALIFIED TECHNICAL PERSONNEL HAVE FOUND IN PREVIOUS TESTS OF THE MSA-LIRA INSTRUMENTS THAT THE ACTUAL NOISE LEVEL DOES NOT EXCEED 0.5 PERCENT. THE REASON GIVEN FOR THE NOISE LEVEL BEING LISTED IN MSA'S BULLETIN AS NOT EXCEEDING 1.0 PERCENT IS THAT THIS IS THE NORMAL SPECIFICATION REQUIRED IN PURCHASES OF THE INSTRUMENTS WHEN USED FOR PROCESS STREAM MONITORING. IS FURTHER REPORTED THAT SINCE IT IS CONSIDERED THAT THE ITEM COULD BE ACCEPTED AND UTILIZED BY THE GOVERNMENT WITH THE NOISE LEVEL INDICATED IN MSA'S BULLETIN THE DEVIATION, IF ANY, WOULD BE CONSIDERED ONLY A MINOR DEFICIENCY. IN ADDITION THE AGENCY TECHNICIANS, AFTER REVIEWING THE REPORT OF DR. JOHN D. SANDERS WHICH WAS FURNISHED BY YOU, DISAGREE COMPLETELY WITH HIS ESTIMATE OF THE COST OF MODIFYING THE UNIT TO MEET THE SPECIFICATIONS, AND STATE THAT ANY NECESSARY MODIFICATIONS COULD BE MADE FOR MUCH LESS THAN $10 PER UNIT THUS HAVING A NEGLIGIBLE EFFECT ON THE PRICE.

THIS OFFICE HAS HELD ON NUMEROUS OCCASIONS THAT THE DRAFTING OF PROPER SPECIFICATIONS REFLECTING THE NEEDS OF THE GOVERNMENT, AND THE FACTUAL DETERMINATION WHETHER ARTICLES OFFERED BY BIDDERS MEET SUCH SPECIFICATIONS, ARE PRIMARILY WITHIN THE PROVINCE OF THE CONTRACTING AGENCY. 38 COMP. GEN. 190; 36 ID. 251 AND 17 ID. 554; B-160357, MARCH 31, 1967. MOREOVER, IN THE ABSENCE OF A CLEAR QUALIFICATION IN THE BID, WHICH WOULD RESTRICT THE GOVERNMENT'S RIGHT TO REQUIRE FULL COMPLIANCE WITH THE SPECIFICATIONS, ANY DETERMINATION AS TO WHETHER AN OFFERED PRODUCT MEETS THE ADVERTISED SPECIFICATIONS SHOULD BE BASED UPON AN EXAMINATION OF THE PRODUCT ITSELF IN RELATION TO THE SPECIFICATION, RATHER THAN UPON UNSUPPORTED OR SPECULATIVE INTERPRETATIONS OF UNSOLICITED DESCRIPTIVE LITERATURE. SEE 38 COMP. GEN. 71, 75. SINCE IT IS THE JUDGMENT OF THE COGNIZANT TECHNICAL PERSONNEL OF THE PROCURING AGENCY THAT THE NOISE LEVEL DOES NOT IN FACT EXCEED 0.5 PERCENT, WE CANNOT CONCLUDE THAT MSA'S UNIT DOES NOT CONFORM TO THE SPECIFICATIONS IN THIS RESPECT. CONSEQUENTLY, WE NEED NOT BE CONCERNED WITH THE COST OF MODIFYING THE UNIT.

CONCERNING THE TERM "ALL SALES ARE PAYABLE NET 30 FOLLOWING DATE OF INVOICE" FOUND ON MSA'S COMPANY BID FORM, WE AGREE WITH THE PROCURING ACTIVITY'S STATEMENT THAT THIS IS MERELY A PAYMENT TERM EXPRESSED BY THE BIDDER IN ACCORDANCE WITH THE TERMS OF THE IFB WHICH PROVIDES ON THE COVER PAGE, BLOCK 16, FOR THE BIDDER TO OFFER PROMPT PAYMENT DISCOUNTS BY INSERTING ANY DESIRED FIGURE IN ONE OR MORE OF THE BLANKS PRECEDING THE WORDS "PERCENT 10 CALENDAR DAYS" ,"PERCENT 20 CALENDAR DAYS" ,"PERCENT 30 CALENDAR DAYS" , AND "PERCENT--- CALENDAR DAYS.' "NET 30 FOLLOWING DATE OF INVOICE" MERELY MEANS THAT THE GOVERNMENT WILL NOT BE ALLOWED ANY DISCOUNT AND THAT PAYMENT IS EXPECTED WITHIN 30 DAYS FOLLOWING DATE OF INVOICE--- AN EXPECTATION WHICH IS NOT CONTRARY TO THE TERMS OF PAYMENT INCLUDED IN THE STANDARD TERMS OF THE CONTRACT. THIS OFFICE HAS NOT APPARENTLY BEEN CALLED UPON TO RENDER A DECISION CONCERNING THE MEANING OF THE TERM "NET 30FOLLOWING DATE OF INVOICE.' HOWEVER, WE HAVE OBSERVED THAT BIDDERS OFTEN OFFER DISCOUNTS EXPRESSED IN SUCH TERMS OF "2 PERCENT 10 DAYS, NET 30" , AND WE ARE NOT AWARE THAT THE PROPRIETY OF SUCH STATEMENTS HAS EVER BEEN QUESTIONED. IN THE PRESENT CASE IT IS NOTED BOTH MSA AND BECKMAN INSTRUMENTS, INC., INSERTED THE WORD "NET" IN THE SPACE PROVIDED IN BLOCK 16 BEFORE THE WORDS "PERCENT 30 CALENDAR DAYS," AND WE DO NOT BELIEVE THAT THIS IS IN ANY WAY AT VARIANCE WITH THE LANGUAGE OF THE MSA FORM OR THAT IT IMPOSES UPON THE GOVERNMENT ANY GREATER OBLIGATION THAN THE TERMS OF SECTION 7 OF STANDARD FORM 32, ENTITLED "PAYMENTS," WHICH STATES: "THE CONTRACTOR SHALL BE PAID, UPON SUBMISSION OF PROPER INVOICES OR VOUCHERS, THE PRICES STIPULATED HEREIN FOR SUPPLIES DELIVERED AND ACCEPTED OR SERVICES RENDERED AND ACCEPTED, LESS DEDUCTION, IF ANY, AS HEREIN PROVIDED.'

RESPECTING THE SECOND SENTENCE OF THE QUOTED STATEMENT, WHICH STATES "NO WITHHOLDING WILL BE ALLOWED WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER," THE PROCURING ACTIVITY STATES THAT THIS IS IN ACCORDANCE WITH THE TERMS OF THE IFB, SINCE THE GOVERNMENT WOULD NOT WITHHOLD PAYMENT AFTER DELIVERY AND ACCEPTANCE OF THE EQUIPMENT. WHILE THIS MAY BE TRUE IN THE ABSENCE OF ANY CLAIM BY THE GOVERNMENT AGAINST THE CONTRACTOR, THE FACT REMAINS THAT THE GOVERNMENT DOES HAVE A RIGHT IN CERTAIN CIRCUMSTANCES TO WITHHOLD PAYMENT WITHOUT THE CONSENT OF THE SELLER, EVEN AFTER DELIVERY AND ACCEPTANCE OF THE EQUIPMENT. IN THE PRESENT CASE SECTION 11 OF SF 32, ENTITLED "DEFAULT," STATES:

(D) * * * THE GOVERNMENT MAY WITHHOLD FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR FOR SUCH COMPLETED SUPPLIES OR MANUFACTURING MATERIALS SUCH SUM AS THE CONTRACTING OFFICER DETERMINES TO BE NECESSARY TO PROTECT THE GOVERNMENT AGAINST LOSS BECAUSE OF OUTSTANDING LIENS OR CLAIMS OF FORMER LIEN HOLDERS. IN ADDITION THERE ARE A NUMBER OF STATUTORY PROVISIONS PERMITTING WITHHOLDING OF PAYMENT WITHOUT THE CONTRACTOR'S PERMISSION, INCLUDING THE CONTRACT WORK HOURS STANDARDS ACT, PUBLIC LAW 87-581, 40 U.S.C. 327-332; AND THE WALSH-HEALEY ACT, 41 U.S.C. 36, BOTH OF WHICH ARE APPLICABLE TO THE SUBJECT PROCUREMENT. THE INTERNAL REVENUE LAWS ALSO PROVIDE FOR LIENS AGAINST ANY CREDITS OF A DELINQUENT TAXPAYER WHICH IN THE CASE OF A GOVERNMENT CONTRACTOR WOULD REQUIRE WITHHOLDING OF CONTRACT PAYMENTS; AND THE GOVERNMENT HAS THE SAME RIGHT AS ANY CREDITOR TO APPLY ANY MONEY OR CREDITS OF ITS DEBTOR IN ITS HANDS TO THE SATISFACTION OF ITS DEBT. 19 COMP. GEN. 785, 787. SEE, ALSO, 45 COMP. GEN. 484.

ASSUMING THAT, AS YOU CONTEND, THE QUOTED LANGUAGE WOULD OPERATE TO RESTRICT ANY RIGHTS WHICH THE GOVERNMENT MIGHT OTHERWISE HAVE, WE ARE OF OPINION THAT IT COULD PROPERLY HAVE BEEN HANDLED UNDER THE FOLLOWING PROVISIONS OF SECTION 1-2.404-2 (B) OF THE FEDERAL PROCUREMENT REGULATIONS:

(B) ORDINARILY, A BID SHALL BE REJECTED WHERE THE BIDDER IMPOSES CONDITIONS WHICH WOULD MODIFY REQUIREMENTS OF THE INVITATION FOR BIDS OR LIMIT HIS LIABILITY TO THE GOVERNMENT SO AS TO GIVE HIM AN ADVANTAGE OVER OTHER BIDDERS. FOR EXAMPLE, BIDS SHALL BE REJECTED IN WHICH THE BIDDER:

(5) LIMITS RIGHTS OF GOVERNMENT UNDER ANY CONTRACT CLAUSE. HOWEVER, A LOW BIDDER MAY BE REQUESTED TO DELETE OBJECTIONABLE CONDITIONS FROM HIS BID IF THESE CONDITIONS DO NOT GO TO THE SUBSTANCE, AS DISTINGUISHED FROM THE FORM OF THE BID. A CONDITION GOES TO THE SUBSTANCE OF A BID WHERE IT AFFECTS PRICE, QUANTITY, QUALITY, OR DELIVERY OF THE ITEMS OFFERED. SEE NO GROUND FOR CONSIDERING THE STATED STIPULATION AGAINST WITHHOLDING AS AFFECTING THE PRICE, QUANTITY, QUALITY, OR DELIVERY OF THE CONTRACT ITEMS.

HOWEVER, SINCE THE MSA BID WAS ACCEPTED WITHOUT DELETION OF THE PURPORTED LIMITATION, THE QUESTION PRESENTED IS WHETHER THE ACCEPTANCE GAVE RISE TO A VALID CONTRACT OR WHETHER THE ACCEPTANCE WAS SO PLAINLY ILLEGAL AS TO RENDER THE OSTENSIBLE CONTRACT VOID AB INITIO.

CONCEDING THAT NO OFFICER OR AGENT OF THE GOVERNMENT HAS AUTHORITY TO BIND THE GOVERNMENT NOT TO EXERCISE A LEGAL RIGHT OR REMEDY PURSUANT TO A SPECIFIC STATUTE, WE STILL CANNOT CONSIDER THE CONTRACT VOID IF THE ACTION OF THE CONTRACTING OFFICER, EVEN IF AUTHORIZED, WOULD NOT HAVE AFFECTED THE GOVERNMENT'S RIGHTS.

IN THIS INSTANCE WE DO NOT BELIEVE THAT THE ACCEPTANCE OF THE MSA BID, INCLUDING THE WORDING ,NO WITHHOLDING WILL BE ALLOWED WITHOUT THE PRIOR WRITTEN CONSENT OF THE SELLER," RESULTED IN ANY DIMINUTION OF THE RIGHTS WHICH THE GOVERNMENT WOULD HAVE WITHOUT THAT LANGUAGE. IF THE GOVERNMENT DOES WITHHOLD ANY OR ALL OF THE CONTRACT PRICE BY REASON OF A CLAIM AGAINST THE CONTRACTOR, WE ARE NOT AWARE OF ANY REMEDY AVAILABLE TO THE CONTRACTOR EXCEPT AN ACTION FOR THE AMOUNT WITHHELD, AND IN THE EVENT OF SUCH AN ACTION IT IS OUR OPINION THE GOVERNMENT COULD ASSERT ITS CLAIM EITHER AS A CROSS-CLAIM OR AS A SEPARATE ACTION.

WE THEREFORE CONCLUDE THAT THE ACCEPTANCE OF THE MSA BID CONSUMMATED A VALID AND ENFORCEABLE CONTRACT WHICH IS IN LEGAL EFFECT THE SAME CONTRACT WHICH WAS OFFERED TO ALL BIDDERS.