B-170501, APR 22, 1971

B-170501, APR 22, 1971

BID PROTEST - CANCELLATION AND READVERTISEMENT DENIAL OF PROTEST OF SAMUEL S. BARNETT COMPANY, LOW BIDDER, AGAINST CANCELLATION OF IFB AND READVERTISEMENT AND AWARD OF CONTRACT FOR BUILDING ALTERATIONS TO ANOTHER, UNDER SECOND IFB ISSUED BY CHICAGO REGIONAL OFFICE OF GENERAL SERVICES ADMINISTRATION. EVEN THOUGH LOW BIDDER WAS WILLING TO CONTRACT UPON FIRST INVITATION, WHICH WAS REJECTED BECAUSE IT WAS BASED ON INCORRECT WAGE SCALE, AWARD WOULD HAVE BEEN IMPROPER AS CONTRACT MUST BE BASED ON WAGE SPECIFICATIONS IN THE SOLICITATION AND ON TERMS OFFERED TO ALL BIDDERS. REJECTION AND READVERTISEMENT ARE REQUIRED WHEN ERROR IS DISCOVERED PRIOR TO CONTRACTING, NOTWITHSTANDING ANY PREJUDICE TO LOW BIDDER THAT MAY RESULT.

TO MR. SEYMOUR H. MANDELL:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF SAMUEL S. BARNETT COMPANY (BARNETT), AGAINST THE CANCELLATION OF INVITATION FOR BIDS (IFB) NO. GS-05BC-8865, AND READVERTISEMENT AND AWARD UNDER IFB NO. GS-05BC-8865 -A, BOTH OF WHICH WERE ISSUED BY THE CHICAGO, ILLINOIS, REGIONAL OFFICE OF THE GENERAL SERVICES ADMINISTRATION (GSA).

THE INITIAL INVITATION, ISSUED ON FEBRUARY 24, 1970, REQUESTED BIDS FOR BUILDING ALTERATIONS AT THE UNITED STATES POST OFFICE, ROYAL OAK (OAKLAND COUNTY), MICHIGAN, WITH A BID OPENING DATE SET FOR MARCH 30, 1970. AMENDMENT NO. 1, DATED MARCH 24, 1970, THE BID OPENING DATE WAS EXTENDED INDEFINITELY BECAUSE OF A POSTAL WORKERS' STRIKE AND BIDDERS WERE ADVISED THAT A NEW BID OPENING DATE WOULD BE SET BY A LATER AMENDMENT. ON APRIL 28, 1970, AMENDMENT NO. 2 WAS ISSUED, ESTABLISHING MAY 8, 1970, AS THE NEW BID OPENING DATE AND INCORPORATING WAGE RATE DETERMINATION NO. AJ-12427 TO REPLACE THE ORIGINAL WAGE RATE DETERMINATION WHICH HAD EXPIRED ON APRIL 30, 1970.

TWENTY-EIGHT FIRMS WERE SOLICITED AND SIX BIDS WERE RECEIVED AND OPENED, WITH BARNETT SUBMITTING THE LOWEST BID IN THE AMOUNT OF $215,000.

AFTER OPENING, BUT PRIOR TO AWARD, THE CONTRACTING OFFICER DISCOVERED THAT THE WAGE RATE DETERMINATION INCLUDED WITH AMENDMENT NO. 2 WAS ERRONEOUS IN THAT THE RATES SET FORTH THEREIN WERE THE RATES FOR CALHOUN COUNTY, MICHIGAN, RATHER THAN THE RATES DETERMINED TO BE PREVAILING FOR OAKLAND COUNTY, MICHIGAN. IN SEVERAL JOB CLASSIFICATIONS THE CALHOUN COUNTY WAGE RATES WERE LOWER THAN THOSE OF OAKLAND COUNTY. THEREFORE, IN VIEW OF THE ERRONEOUS WAGE DETERMINATION, ON JUNE 8, 1970, THE CONTRACTING OFFICER NOTIFIED ALL BIDDERS THAT THEIR BIDS WERE REJECTED AND THE PROJECT WOULD BE READVERTISED. ON THE SAME DATE YOU ADVISED THE CONTRACTING OFFICER BY LETTER THAT THE AMOUNT BID BY BARNETT WAS BASED UPON LOCAL WAGE RATES AND THAT HE WOULD AGREE TO BE BOUND BY THE OAKLAND COUNTY WAGE RATES, WITHOUT AN INCREASE IN THE CONTRACT PRICE, UPON AWARD OF THE CONTRACT TO HIM. IT IS REPORTED THAT THE CONTRACTING OFFICER ADVISED YOU BY TELEPHONE THAT, NOTWITHSTANDING THE OFFER MADE ON BEHALF OF BARNETT, HIS BID WAS REJECTED AND THE PROJECT WOULD BE READVERTISED.

ON JUNE 27, 1970, THE PROJECT WAS READVERTISED WITH CORRECTED WAGE RATES. SEVEN BIDS WERE OPENED ON JULY 24, 1970, INCLUDING THE LOW BID OF $212,600 FROM THE MID-CON-COMPANY, INC. (MID-CON). BARNETT'S BID OF $215,000 WAS FOURTH LOWEST.

BY TELEGRAM DATED AUGUST 3, 1970, YOU PROTESTED AGAINST THE CANCELLATION OF THE FIRST INVITATION AND THE PROPOSED AWARD TO MID-CON UNDER THE SECOND INVITATION. HOWEVER, THE CONTRACTING OFFICER DETERMINED, PURSUANT TO PARAGRAPH 1-2.407-8(B)(3)(II) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR), THAT PERFORMANCE WOULD BE UNDULY DELAYED BY FAILURE TO MAKE A PROMPT AWARD BEFORE THE EXPIRATION ON AUGUST 30, 1970, OF THE CORRECT WAGE DETERMINATION. AWARD WAS THEREFORE MADE TO MID-CON ON AUGUST 28, 1970.

WHILE YOU GENERALLY ACCEPT THE FOREGOING FACTUAL STATEMENT AS CORRECT, YOU RAISE SEVERAL ISSUES AS TO THE PROPRIETY OF THE SPECIFIC ACTIONS TAKEN UNDER THESE CIRCUMSTANCES, AS WELL AS ATTACKING GENERALLY THE SOUNDNESS OF GOVERNMENT PROCUREMENT PROCEDURES BEING EMPLOYED IN THIS AREA. WE HAVE CONSIDERED MOST CAREFULLY ALL OF THE ARGUMENTS AND OBSERVATIONS MADE IN YOUR BRIEF, WHICH WE THINK CAN BEST BE SUMMARIZED BY QUOTING FROM YOUR LETTER OF AUGUST 15, 1970, TO OUR OFFICE WHICH STATED:

"UNION LABOR WAGES REQUIRED TO BE BID IN THE METROPOLITAN DETROIT AREA ARE HIGHER THAN THE WAGE SCALES ORDINARILY USED IN FEDERAL WORK. IT IS THE NORMAL AND COMMONLY PRACTICED PROCEDURE FOR BIDDERS TO BID USING THE PREVAILING COMMUNITY AND UNION WAGE SCALE. THE BIDDERS BEING WELL AWARE OF THIS PROCEDURE WERE NOT INFLUENCED BY THE ERRONEOUSLY SENT WAGE SCALE FOR CALHOUN COUNTY IN THE FIRST BID LETTING.

"THE SECOND BIDDING WAS OBVIOUSLY AN ATTEMPT BY OTHER BIDDERS TO TRY TO BEAT THE LOW BIDDER, CREATING UNFAIR COMPETITION, PARTICULARLY IN VIEW OF THE FACT THAT THE FIRST BIDS HAD BEEN PUBLISHED AND THAT THE SECOND BIDS WERE WITHIN $2,000.00, MORE OR LESS, OF THE ORIGINAL BIDS PUBLISHED.

"FURTHERMORE, IF THE GOVERNMENT IS PERMITTED TO AWARD A CONTRACT ON THE BASIS OF A SO-CALLED ALLEGED ERROR TO THOSE BIDDERS WHO MERELY TRIED TO BEAT THE ORIGINAL BID, THEN THE GOVERNMENT IS LITERALLY PARTICIPATING IN A FRAUDULENT BIDDING PRACTICE. IN THE FIRST INSTANCE THERE IS ABSOLUTELY 'NO' REASONABLE GROUNDS TO WARRANT A RE-BID. FURTHER, IF THE GOVERNMENT IS PERMITTED TO ASK FOR RE-BIDS ON THE BASIS OF 'FLY-SPECKING TECHNICALITIES' THEN THE AMERICAN GOVERNMENT HAS TO BE HELD GUILTY OF THE WORST BIDDING PRACTICES CONCEIVABLE IN EITHER PUBLIC OR PRIVATE INDUSTRY."

THE DAVIS-BACON ACT, 40 U.S.C. 276A (SUSPENDED BY PRESIDENTIAL PROCLAMATION 4031, FEBRUARY 23, 1971), REQUIRES THAT THE "ADVERTISED SPECIFICATIONS FOR EVERY CONTRACT IN EXCESS OF $2,000 *** FOR CONSTRUCTION *** SHALL CONTAIN A PROVISION STATING THE MINIMUM WAGES TO BE PAID VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH SHALL BE BASED UPON THE WAGES THAT WILL BE DETERMINED BY THE SECRETARY OF LABOR TO BE PREVAILING *** ." CONSTRUING THIS STATUTORY LANGUAGE, WE HAVE HELD THAT, AS A GENERAL RULE, THE MINIMUM WAGE RATES SO REQUIRED CANNOT BE INCORPORATED IN A CONTRACT IN ANY WAY OTHER THAN AS STIPULATED IN THE STATUTE, THAT IS, BY INCLUSION IN THE SPECIFICATIONS UPON WHICH BIDS OR PROPOSALS LEADING TO THE CONTRACT WERE INVITED. 40 COMP. GEN. 565 (1961); 42 ID. 410 (1963). WE HAVE ALSO HELD THAT A SPECIFICATION PROVISION THAT CONTRACTORS SHALL PAY MINIMUM WAGE RATES AS DETERMINED BY THE SECRETARY OF LABOR, IRRESPECTIVE OF WHETHER SUCH A DETERMINATION IS RECEIVED BEFORE OR AFTER BID OPENING, WOULD NOT BE IN ACCORDANCE WITH THE STATUTE. 40 COMP. GEN. 48 (1960).

IT IS WELL ESTABLISHED THAT THE AWARD OF A CONTRACT PURSUANT TO THE ADVERTISING STATUTES MUST BE MADE UPON THE SAME TERMS OFFERED TO ALL BIDDERS. 37 COMP. GEN. 524, 527 (1958), AND CASES CITED THEREIN. THE LOW BIDDER CANNOT, OF COURSE, BE REQUIRED TO PERFORM ON TERMS AT VARIANCE WITH THOSE INCLUDED IN HIS BID. BY THE SAME TOKEN, IN SITUATIONS INVOLVING A CHANGE IN WAGE RATES, THE GOVERNMENT PROPERLY COULD NOT PERMIT AN OTHERWISE SUCCESSFUL BIDDER TO PERFORM AT HIS ORIGINAL PRICE IN THE ABSENCE OF A PROVISION IN THE INVITATION FOR BIDS SPECIFICALLY PROVIDING FOR SUCH PROCEDURE.

IT MAY WELL BE IN THIS INSTANCE THAT THE DIFFERENCE IN PRICE WHICH COULD BE ATTRIBUTED TO THE CHANGES IN THE WAGE RATES WOULD NOT HAVE BEEN SUFFICIENT TO CHANGE THE RELATIVE STANDING OF BIDDERS. HOWEVER, THE STATUTORY ADVERTISING REQUIREMENTS DO NOT CONTEMPLATE OR SANCTION THE SELECTION OF THE LOWEST BIDDERS ON THE BASIS OF AN ESTIMATE OF WHAT THOSE BIDDERS WOULD HAVE QUOTED ON TERMS WHICH WERE NOT IN FACT ADVERTISED. WHERE A CONTRACT IS TO BE AWARDED PURSUANT TO COMPETITIVE BIDDING, THE LOW BID MUST BE DETERMINED ON THE BASIS OF BIDS ON THE SPECIFICATIONS ACTUALLY TO BE UTILIZED ON THE WORK. THE ONLY PROPER WAY TO DETERMINE THE LOWEST BIDDER IS BY ADVERTISING FOR BIDS ON THE ACTUAL CONTRACT TO BE EXECUTED. 17 COMP. GEN. 427 (1937). THIS PROPOSITION IS NOT CHANGED BECAUSE THE BIDDER MAY BE PAYING THE SAME OR HIGHER WAGE RATES THAN THE CORRECT PREVAILING LABOR RATES TO ITS EMPLOYEES UNDER UNION LABOR AGREEMENTS, AND WE HAVE SO HELD MANY TIMES. SEE, FOR EXAMPLE, B-157894, NOVEMBER 30, 1965; B-169581, MAY 8, 1970.

THUS UNDER THE CIRCUMSTANCES OF THIS CASE, THE MINIMUM WAGE RATES INCLUDED IN AMENDMENT NO. 2 TO THE FIRST INVITATION WERE NOT, IN FACT, BASED ON A DETERMINATION RELEVANT TO THE PROJECT IN QUESTION, AND IT IS OBVIOUS THAT THE INTENT OF THE DAVIS-BACON ACT HAD NOT BEEN SATISFIED. AWARD MADE ON THE BASIS SUGGESTED BY YOU ON BEHALF OF BARNETT WOULD NOT BE AN AWARD BASED UPON THE BID SUBMITTED, BUT UPON TERMS NEGOTIATED AFTER BID OPENING, AND WOULD THEREFORE VIOLATE THE BASIC PRINCIPLES OF THE COMPETITIVE BIDDING PROCEDURE.

CONTRARY TO YOUR ASSERTION, THE DAVIS-BACON ACT DOES MAKE MANDATORY THE INSERTION OF WAGE RATES TO BE PAID IN THE ACTUAL SPECIFICATIONS, AND THE COURT CASES CITED BY YOU FOR THE PROPOSITION THAT CONTRACT PERFORMANCE CAN BE REQUIRED OF ALL BIDDERS REGARDLESS OF THE ABSENCE OF ACTUAL PUBLICATION OF THE SPECIFICATIONS, ARE NOT FOR APPLICATION IN THE PRESENT CIRCUMSTANCES. WE HAVE HELD THAT BID INVITATION PROVISIONS WHICH WOULD PERMIT OR REQUIRE A LOW BIDDER TO ACCEPT AWARD ON THE BASIS OF CHANGED RATES AT HIS ORIGINAL OR AN ADJUSTED PRICE ARE LEGALLY QUESTIONABLE IN VIEW OF THE MANDATORY PROVISION OF THE ACT UNDER DISCUSSION. 44 COMP. GEN. 776 (1965).

TURNING THEN TO WHAT YOU CHARACTERIZE AS "THE MOST CRUCIAL PART OF THIS APPEAL," YOU DRAW COMPARISON BETWEEN TWO EARLIER CASES OF OUR OFFICE IN WHICH YOU BELIEVE THERE IS INCONSISTENCY AND CONFLICT WITH THE VIEW FREQUENTLY ESPOUSED BY THE GENERAL ACCOUNTING OFFICE IN CONSTRUING THE PROVISIONS OF THE DAVIS-BACON ACT. IN THE FIRST CASE, B 154443, JUNE 29, 1964, WHICH IS RELIED ON BY GSA IN ITS PRESENTATION OF THE CASE BEFORE OUR OFFICE, WE HELD THAT ALTHOUGH THE WRONG WAGE DETERMINATION WAS USED IN THE SOLICITATION IT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT TO CANCEL THE ORAL AWARD OF A CONTRACT WHERE THE MISTAKE MADE BY THE DEPARTMENT OF LABOR WAS NOT DISCOVERED UNTIL AFTER THE CONTRACTOR HAD EXECUTED THE CONTRACT AND RETURNED IT TO THE GOVERNMENT FOR ITS WRITTEN EXECUTION. SOME OF THE FACTORS WHICH ENTERED INTO THE CONCLUSION REACHED THERE WERE (1) FUNDING THE PROJECT IN THE NEXT FISCAL YEAR WITH POSSIBLE HIGHER COSTS; (2) DELAY AND POSSIBLE LITIGATION FOR BREACH OF CONTRACT. WE DO NOT VIEW THAT DECISION AS RELAXING THE REQUIREMENTS OF THE ACT, BUT RATHER AS INDICATIVE OF OUR RECOGNITION THAT CORRECTIVE ACTION WAS NOT PRACTICABLE AT THAT STAGE OF THE PROCEEDINGS. IN THIS REGARD, WE THINK THE LAST SENTENCE OF THAT DECISION IS INDICATIVE OF OUR EFFORTS TO CARRY OUT THE INTENT AND DEMANDS OF THE ACT. WE STATED " *** ANY PRICE ADJUSTMENT SHOULD BE BASED UPON DIFFERENCES BETWEEN THE NEW MINIMUM RATES AND THE RATES ACTUALLY USED BY THE CONTRACTOR IN COMPUTING HIS LABOR COST ESTIMATES ON WHICH HIS BID WAS BASED."

IN THE SECOND CASE, B-159359, MAY 18, 1967, WE AGAIN FOUND THAT AS A PRACTICAL MATTER NO USEFUL PURPOSE WOULD BE SERVED BY CANCELLING AN AWARD ALREADY MADE TO THE LOW BIDDER, WHEN IT WAS DISCOVERED THAT THE APPLICABLE WAGE DETERMINATION HAD NOT BEEN INCLUDED IN THE SOLICITATION. INDEED, ONE OF THE REASONS FOR SUCH WAGE DETERMINATION NOT BEING A PART OF THE BID PACKAGE WAS THAT THERE WERE 177 DIFFERENT AND WIDELY DISPERSED CITIES IN THE UNITED STATES AND WORLDWIDE (EXCEPT FOR CANADA) CONCERNED IN THE PROCUREMENT. ALSO, THE SERVICES TO BE PERFORMED MADE MARGINAL AT BEST THE APPLICABILITY OF THE DAVIS-BACON ACT.

WHILE IT MIGHT APPEAR TO YOU THAT THESE CASES REPRESENT A DEPARTURE FROM THE BASIC REQUIREMENTS OF EQUAL PROTECTION AND DUE PROCESS UNDER THE CONSTITUTION, WE DO NOT THINK THAT THEY ARE INCONSISTENT WITH COMPARABLE FACT SITUATIONS FACED BY OUR OFFICE. THE FACTS IN THOSE CASES ARE READILY DISTINGUISHABLE FROM THE ONES HERE INVOLVED. IN BOTH OF THOSE CASES AWARD OF A CONTRACT HAD BEEN MADE, WHILE IN THE PRESENT CASE THE ERROR WAS DISCOVERED AFTER BID OPENING BUT BEFORE AWARD. WE RECOGNIZE THAT THE REJECTION OF ALL BIDS AFTER A PUBLIC OPENING PREJUDICES THE LOW BIDDER AND MAY DO DAMAGE TO THE COMPETITIVE BID SYSTEM, PARTICULARLY IN THOSE INSTANCES WHERE THE LOW BIDDER WAS IN NO WAY RESPONSIBLE FOR THE CIRCUMSTANCES REQUIRING SUCH ACTION. HOWEVER, THE AVOIDANCE OF SUCH A RESULT CANNOT JUSTIFY AN OTHERWISE IMPROPER PROCUREMENT ACTION.

CONCERNING YOUR CONTENTION THAT DAMAGES SHOULD BE AWARDED TO BARNETT FOR HIS FAILURE TO RECEIVE THE AWARD, IT WOULD APPEAR THAT SUCH DAMAGES ARE ALLOWABLE ONLY WHEN IT CAN BE DEMONSTRATED THAT GOVERNMENT OFFICIALS DELIBERATELY INTENDED TO AWARD A CONTRACT TO A PREDETERMINED CONTRACTOR, EVEN THOUGH THE CONTRACTOR DID NOT SUBMIT THE LOWEST BID. MEYER PRODUCTS COMPANY V UNITED STATES, 135 CT. CL. 63 (1956). SINCE WE FAIL TO FIND ANY EVIDENCE THAT GSA HAD SUCH INTENT IN THE SUBJECT PROCUREMENT, WE PERCEIVE NO BASIS ON WHICH YOUR CLAIM FOR DAMAGES COULD PROPERLY BE ALLOWED.

ACCORDINGLY, SINCE WE FIND NO LEGAL BASIS TO OBJECT TO THE CANCELLATION OF THE FIRST INVITATION OR THE READVERTISEMENT AND AWARD OF THE CONTRACT UNDER THE CIRCUMSTANCES HERE PRESENT, YOUR PROTEST ON BEHALF OF BARNETT MUST BE DENIED.