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B-173175, AUG 11, 1971

B-173175 Aug 11, 1971
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THE CONTRACTING OFFICER REJECTED THE BIDS BECAUSE ALL WERE BELOW THE CURRENT MARKET APPRAISAL (CMA) VALUE OF THE SHIP. BECAUSE OF A HIGHER BID RECEIVED FROM NATIONAL METAL AND STEEL CORPORATION WHICH WAS PHONED IN LATE BY THE TELEGRAPH COMPANY. THERE IS NO REGULATION WHICH PROHIBITS ITS USE FOR PRICE COMPARISON PURPOSES AS WAS DONE HERE. FINDS THAT THE CANCELLATION OF THE SOLICITATION WAS A REASONABLE EXERCISE OF THE ADMINISTRATIVE DISCRETION. TO NICOLAI JOFFE CORPORATION: REFERENCE IS MADE TO YOUR LETTERS DATED JUNE 4. THE INVITATION SOLICITED BIDS ON TWO COMBATANT TYPE VESSELS WHICH WERE BEING DISPOSED OF UNDER THE PROVISIONS OF 10 U.S.C. 7305. WE ARE CONCERNED HERE ONLY WITH THE DISPOSITION OF ITEM NO. 1 OF THE SALE.

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B-173175, AUG 11, 1971

BID PROTEST - CURRENT MARKET APPRAISAL - CANCELLATION OF SOLICITATION - LATE BID USED FOR PRICE COMPARISON DENIAL OF PROTEST BY THE NICOLAI JOFFE CORPORATION AGAINST THE REJECTION OF ALL BIDS UNDER AN IFB ISSUED FOR THE DISPOSITION OF THE SAN JACINTO, AN AUXILIARY AIRCRAFT TRANSPORT, BY THE DEFENSE SURPLUS SALES OFFICE. THE CONTRACTING OFFICER REJECTED THE BIDS BECAUSE ALL WERE BELOW THE CURRENT MARKET APPRAISAL (CMA) VALUE OF THE SHIP, AND BECAUSE OF A HIGHER BID RECEIVED FROM NATIONAL METAL AND STEEL CORPORATION WHICH WAS PHONED IN LATE BY THE TELEGRAPH COMPANY. DOD 4160.21-M GOVERNS THE ESTABLISHMENT AND USE OF CMA'S AND REQUIRES THAT THEY BE USED IN CONJUNCTION WITH THE OTHER LISTED FACTORS, INCLUDING SOUND PERSONAL JUDGEMENT, WHEN CONSIDERING THE BIDS FOR AWARD. FURTHER, WHILE THE CONTRACTING OFFICER MAY NOT CONSIDER A LATE BID FOR AWARD PURPOSES, THERE IS NO REGULATION WHICH PROHIBITS ITS USE FOR PRICE COMPARISON PURPOSES AS WAS DONE HERE. CONSEQUENTLY, THE COMP. GEN. FINDS THAT THE CANCELLATION OF THE SOLICITATION WAS A REASONABLE EXERCISE OF THE ADMINISTRATIVE DISCRETION.

TO NICOLAI JOFFE CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS DATED JUNE 4, 1971, JUNE 7, 1971, JULY 16, 1971, AND OTHER CORRESPONDENCE, PROTESTING THE REJECTION OF ALL BIDS BY THE CONTRACTING OFFICER UNDER INVITATION FOR BIDS NO. 16 1119, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, NEWPORT, RHODE ISLAND.

THE INVITATION SOLICITED BIDS ON TWO COMBATANT TYPE VESSELS WHICH WERE BEING DISPOSED OF UNDER THE PROVISIONS OF 10 U.S.C. 7305, AND EXECUTIVE ORDER 10885, AUGUST 31, 1960. WE ARE CONCERNED HERE ONLY WITH THE DISPOSITION OF ITEM NO. 1 OF THE SALE, AN AUXILIARY AIRCRAFT TRANSPORT - THE SAN JACINTO. THREE BIDS ON THIS ITEM WERE RECEIVED AND OPENED ON MAY 26, 1971, WITH YOUR FIRM SUBMITTING THE HIGHEST BID - $233,546.00. THE OTHER BIDS WERE $210,100.00 AND $163,899.99, RESPECTIVELY. A CURRENT MARKET APPRAISAL (CMA) OF $250,000.00 HAD BEEN ESTABLISHED FOR THE SAN JACINTO PRIOR TO THE SOLICITATION OF BIDS.

IT IS REPORTED THAT PRIOR TO BID OPENING A TELEGRAM FROM NATIONAL METAL AND STEEL CORPORATION (NATIONAL) WAS TELEPHONED TO THE SALES OFFICE BY THE TELEGRAPH COMPANY REQUESTING THAT NATIONAL'S BID BE REDUCED TO $266,783.00. HOWEVER, THE ACTUAL TELEGRAM AND THE ORIGINAL BID FROM NATIONAL WERE NOT RECEIVED UNTIL AFTER THE BID OPENING, AND IT WAS DETERMINED THAT THE LATE BID COULD NOT BE CONSIDERED. (THE BID WAS RECEIVED ON MAY 27 AND THE TELEGRAM WAS RECEIVED MAY 28, 1971.) IT IS FURTHER REPORTED THAT ON MAY 27, 1971, A REVIEW BOARD CONVENED TO DISCUSS THE FACTORS INVOLVED AND UPON CONCLUSION OF THE MEETING THE CONTRACTING OFFICER DETERMINED THAT ALL BIDS SHOULD BE REJECTED AND THE VESSEL REOFFERED FOR SALE. HIGHER AUTHORITY CONCURRED IN THIS DECISION. THE DECISION WAS PREMISED ON THE CONCLUSION THAT THE HIGHEST OFFER OF $233,546.00 DID NOT REPRESENT A FAIR RETURN TO THE GOVERNMENT, AS INDICATED BY THE CMA OF $250,000.00 AND AS CORROBORATED BY THE TELEGRAPHIC NOTIFICATION PRIOR TO BID OPENING OF AN INTENDED BID OF $266,783.00.

YOU PROTEST THE REJECTION OF YOUR BID AS VIOLATIVE OF APPLICABLE REGULATIONS; THAT THE REJECTION OF ALL BIDS AND THE REOFFER OF THE SHIP IS PREDICATED ON USE OF IMPROPERLY OBTAINED INFORMATION; AND THAT YOUR OFFER IS EMINENTLY FAIR AND REASONABLE AND NOT INIMICAL TO THE BEST INTERESTS OF THE GOVERNMENT. IN SUPPORT OF YOUR POSITION YOU STATE THAT ON MAY 15, 1971, SALE WAS MADE OF THE SHIP MONTEREY - A SISTER SHIP TO THE SAN JACINTO - TO THE HIGH BIDDER FOR $226,666.67; THAT YOUR BID FOR THE SAN JACINTO EXCEEDED THAT SALE PRICE ALTHOUGH THE CURRENT MARKET FOR SCRAP METAL HAD BECOME DEPRESSED. YOU CONTEND THAT THE ADMINISTRATIVE REPORT INDICATING THAT THE SAN JACINTO WAS MORE VALUABLE THAN THE MONTEREY BECAUSE OF THE PRESENCE OF ADDITIONAL EQUIPMENT AND OIL, IS MISLEADING SINCE ITS VALUE AS SCRAP "COULD ADD ONLY BETWEEN $5,000.00 TO $6,000.00 TO THE PRICE OF THE MONTEREY *** ;" AND THAT YOUR BID FOR THE SAN JACINTO EXCEEDED THESE LATTER FIGURES.

YOU STATE THAT ASSUMING ARGUENDO THAT THE GOVERNMENT'S APPRAISAL WAS APPROPRIATE, THE DIFFERENCE BETWEEN THAT OFFERED BY JOFFE AND THAT "HOPED FOR" BY THE GOVERNMENT WAS NOT SUFFICIENT - ONLY 6-1/2 PERCENT - FOR THE GOVERNMENT TO REJECT THE JOFFE BID.

AS TO THE GOVERNMENT'S CONSIDERATION OF THE NATIONAL METAL AND STEEL CORPORATION TELEGRAM, YOU STATE THAT THIS WAS IN VIOLATION OF ASPR 2 304(A), WHICH PROVIDES THAT NO INFORMATION CONTAINED THEREIN SHALL BE DISCLOSED PRIOR TO THE TIME SET FOR BID OPENING. YOU CONTEND THAT THE TELEGRAPHIC INFORMATION SHOULD NOT HAVE BEEN DIVULGED TO THE CONTRACTING OFFICER AND HE SHOULD NOT HAVE LOOKED TO THE LATE TELEGRAM BID FOR SUBSTANTIATION OF THE VALUE SET BY THE AGENCY FOR THE VESSEL IN QUESTION. IN THIS REGARD, YOU CITE 47 COMP. GEN. 401 (1968), WHICH STATES AT PAGE 404 AS FOLLOWS:

"SINCE YOU HAD SUBMITTED A NONRESPONSIVE BID YOUR RELATIVELY HIGH BID PRICE WAS NOT FOR EVALUATION OR COMPARISON. *** IT IS WELL ESTABLISHED THAT IN THE SALE OF SURPLUS PERSONAL PROPERTY, THE FAIR MARKET VALUE OF A COMMODITY IS ESTABLISHED THROUGH THE COMPETITIVE BIDDING SYSTEM."

WE NOTE THAT UNDER PARAGRAPH 3, "GENERAL SALE TERMS AND CONDITIONS - COMBATANT VESSELS," DLSC FORM 716, WHICH IS A PART OF THE SOLICITATION, BIDDERS WERE ADVISED THAT THE GOVERNMENT RESERVED THE RIGHT TO REJECT ALL BIDS. WHILE WE HAVE HELD IN OUR DECISIONS THAT THIS RIGHT SHOULD BE EXERCISED ONLY FOR A COGENT OR COMPELLING REASON, ONE OF THE RECOGNIZED REASONS FOR REJECTING ALL BIDS IS THE LACK OF A REASONABLE PRICE UPON WHICH TO MAKE THE AWARD. SEE 43 COMP. GEN. 15 (1963); 49 COMP. GEN. 244, 249 (1969).

OBVIOUSLY THE DETERMINATION OF WHAT CONSTITUTES A REASONABLE PRICE IS A MATTER OF JUDGMENT. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE ACCEPTABLE BID IS LESS THAN (IN THE CASE OF A SALE) THE AMOUNT WHICH THE GOVERNMENT SHOULD BE ABLE TO SELL THE ITEM IN QUESTION, WE BELIEVE THE REJECTION OF ALL BIDS AND READVERTISEMENT OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION.

AS STATED, THE SAN JACINTO HAD AN ESTABLISHED CMA OF $250,000.00. THIS CONNECTION, IT IS REPORTED THAT A CURRENT MARKET APPRAISAL (CMA) IS REQUIRED TO BE ESTABLISHED FOR EACH ITEM OFFERED FOR SALE BY A DEFENSE SURPLUS SALES OFFICE. THE PROVISIONS OF DOD 4160.21-M GOVERNING THE ESTABLISHMENT AND USE OF CMA'S STATE THAT THESE APPRAISALS ARE TO BE DEVELOPED FROM INFORMATION AVAILABLE FROM THE SALES OFFICE STATISTICS BASED ON PAST SALES EXPERIENCE; CURRENT MARKET PRICES AND TRENDS; DEGREE OF MARKET SATURATION; AND VALUE OF BASIC MATERIAL CONTENT.

A "MEMORANDUM FOR THE RECORD" DATED JUNE 10, 1971, PREPARED BY THE CHIEF, DEFENSE SURPLUS SALES OFFICE, REGARDING THE ESTABLISHMENT OF A CMA PER THE SAN JACINTO REPORTS AS FOLLOWS:

"2. IN THE CASE OF THE SAN JACINTO, THE FACT THAT ITS LOCATION WAS SAN DIEGO, THE ADDITIONAL ELEVEN 40 MM GUN MOUNTS, 26 GUN BARRELS, AND NINE GUN DIRECTORS, AND 200,000 GALLONS OF OIL REMAINING ABOARD WERE TAKEN INTO CONSIDERATION. THE CMA WAS THEN ESTABLISHED AT $250,000. IT WAS APPROVED BY THE MERCHANDISING DIVISION CHIEF AND THE DSSO CHIEF."

DSA ACKNOWLEDGES, HOWEVER, THAT A CMA IS NOT AN UPSET PRICE OR A MINIMUM PRICE BELOW WHICH BIDS WILL NOT BE ACCEPTED, BUT IS CONSIDERED ALONG WITH OTHER FACTORS WHICH BECOME KNOWN AFTER BID OPENING TO DETERMINE WHETHER AN AWARD SHOULD BE MADE ON THE BASIS OF THE HIGH BID OR WHETHER THE GOVERNMENT SHOULD EXERCISE ITS RIGHT TO REJECT ALL BIDS. IN THIS REGARD, DOD 4160.21-M STATES THAT CONTRACTING OFFICERS WILL USE CMA'S IN CONJUNCTION WITH SOUND PERSONAL JUDGMENT AT THE TIME BIDS ARE CONSIDERED FOR CONTRACT AWARDS; AND THAT THEY SHOULD ALSO GIVE CONSIDERATION TO SUCH ASPECTS AS THE NUMBER OF BIDS RECEIVED, RANGE OF BIDS, GEOGRAPHICAL AREAS FROM WHICH BIDS ARE RECEIVED, MARKET TRENDS AT THE TIME OF BID OPENING AND SO ON.

IN DECIDING TO REJECT ALL BIDS IN THIS CASE, THE CONTRACTING OFFICER GAVE CONSIDERATION TO A SO-CALLED "INTENDED BID" WHICH WAS RECEIVED TOO LATE TO BE CONSIDERED FOR THE AWARD. WE CANNOT AGREE WITH YOUR CONTENTION THAT THE CONTRACTING OFFICER VIOLATED THE LATE BID REGULATIONS WHEN HE GAVE CONSIDERATION TO THIS LATE BID FOR THE PURPOSE OF DETERMINING WHETHER YOUR TIMELY BID REPRESENTED A FAIR RETURN TO THE GOVERNMENT.

THE LATE BID REGULATIONS ARE DESIGNED TO GOVERN THE RESPONSIVENESS OF LATE BIDS FOR AWARD CONSIDERATION. THE REGULATIONS PROVIDE THAT LATE BIDS WHICH ARE NOT CONSIDERED FOR AWARD SHALL BE RETURNED TO THE BIDDERS UNOPENED. ASPR 2-403.7. ALSO, IT IS PROVIDED THAT BID INFORMATION RECEIVED BY THE BID OFFICE IN THE FORM OF A TELEPHONE CALL FROM A TELEGRAPH COMPANY SHOULD BE SAFEGUARDED AND NOT DISCLOSED BEFORE BID OPENING. ASPR 2-304(A). THERE IS NO INDICATION THAT THE NATIONAL BID WAS HANDLED CONTRARY TO THESE REGULATIONS.

BUT, WE DO NOT FIND ANY REGULATION WHICH PRECLUDES THE USE OF SUCH TELEPHONED INFORMATION AFTER BID OPENING FOR THE PURPOSE OF MAKING A PRICE COMPARISON. WE CANNOT CONCLUDE THAT SUCH INFORMATION SHOULD NOT BE CONSIDERED BY THE CONTRACTING OFFICER IN A PRICE COMPARISON, ALTHOUGH WE BELIEVE THAT THE FAIR MARKET VALUE OF AN ITEM IS BEST ESTABLISHED THROUGH THE COMPETITIVE BIDDING SYSTEM AND NOT BY THE USE OF INFORMATION OF A SPECULATIVE NATURE.

IN VIEW OF THE CIRCUMSTANCES AND CONSIDERING THAT SALES CONTRACTING OFFICERS ARE CLOTHED WITH BROAD POWERS OF DISCRETION IN DECIDING WHETHER OR NOT THE HIGH BID RECEIVED UNDER AN INVITATION REPRESENTS A FAIR RETURN TO THE GOVERNMENT, WE FIND THAT CANCELLATION OF THE INVITATION WAS A REASONABLE EXERCISE OF THE ADMINISTRATIVE DISCRETION. WE MUST DENY YOUR PROTEST.

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