B-174449, JAN 12, 1972, 51 COMP GEN 403

B-174449, JAN 12, 1972, 51 COMP GEN 403

BIDS - SIGNATURES - MULTIPLE BIDS THE FACT THAT BOTH THE LOW AND HIGH BIDS TO CONSTRUCT AN ADMINISTRATIVE BUILDING AT A GOVERNMENT INSTALLATION WERE SIGNED BY THE SAME INDIVIDUAL DOES NOT REQUIRE REJECTION OF THE LOW BID WHERE THE EVIDENCE SHOWS THE MULTIPLE BIDS WERE SUBMITTED FOR LEGITIMATE BUSINESS REASONS AND THE SUBMISSION OF BOTH BIDS WAS NOT AN ATTEMPT TO CIRCUMVENT STATUTORY OR REGULATORY REQUIREMENTS OR TO PREJUDICE EITHER THE UNITED STATES OR OTHER BIDDERS. FURTHERMORE, IT IS IMMATERIAL WHETHER THE PRICES QUOTED WERE DISCUSSED BY THE CONCERNS BEFORE SUBMITTING SEPARATE BIDS, FOR ANY DISCUSSION WOULD NOT CONSTITUTE A REASONABLE BASIS FOR CONCLUDING THAT A CONSPIRACY HAD BEEN ENTERED INTO TO ELIMINATE COMPETITION FROM OTHER BIDDERS. CONTRACTS - SUBCONTRACTS BID SHOPPING - LISTING OF SUBCONTRACTORS WHERE THE INVITATION FOR BIDS DID NOT REQUIRE A BIDDER TO NAME HIS SUBCONTRACTORS AND THERE WAS NO STATUTORY OR REGULATORY REQUIREMENT FOR THE LISTING OF SUBCONTRACTORS, THERE IS NO BASIS TO REJECT THE LOW BID FOR THE CONSTRUCTION OF A GOVERNMENT BUILDING FOR FAILING TO IDENTIFY THE SUBCONTRACTORS USED IN THE COMPILATION OF THE BID OR TO BE USED IN THE PERFORMANCE OF THE CONTRACT. SINCE "BID SHOPPING" WAS NOT PROHIBITED UNDER THE PROCUREMENT, THE FIXED PRICE STATED IN THE BID COULD BE PREMISED ON NOTHING MORE THAN THE WISDOM OF THE BIDDER, HOWEVER, THE USE OF SUBCONTRACTORS' BIDS AS A GUIDE IN DETERMINING THE PRIME BID WOULD NOT GIVE THE BIDDER AN UNFAIR ADVANTAGE, AND IT FOLLOWS AN AWARD TO THE LOW BIDDER CONSTITUTES AN UNCONDITIONAL OBLIGATION FOR THE GOVERNMENT TO PAY THE FIXED PRICE AND THE CONTRACTOR TO PERFORM AT THAT PRICE.

TO DAVID I. ABSE, JANUARY 12, 1972:

REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 1, 1971, PROTESTING IN BEHALF OF FREITAG-WEINHARDT, INC., AGAINST THE PROPOSED AWARD OF A CONTRACT TO THE JOINT VENTURE OF L. KAYE CONSTRUCTION COMPANY AND THE FOWLER COMPANY, INC. (KAYE-FOWLER), ST. LOUIS, MISSOURI, UNDER INVITATION FOR BIDS (IFB), DACA23-72-B-0001, ISSUED BY THE CHICAGO DISTRICT, U.S. ARMY CORPS OF ENGINEERS, CHICAGO, ILLINOIS.

THE INVITATION WAS ISSUED FOR THE CONSTRUCTION OF A TWO STORY, STEEL FRAME, ADMINISTRATION BUILDING WITH INTERIOR AND EXTERIOR UTILITIES AND SITE WORK AT THE NEWPORT ARMY AMMUNITION PLANT, NEWPORT, INDIANA. EIGHT BIDS WERE RECEIVED. THE APPARENT LOW BIDDER WAS KAYE-FOWLER IN THE AMOUNT OF $1,950,000. THE SECOND LOW BID, IN THE AMOUNT OF $1,952,053, WAS SUBMITTED BY FREITAG-WEINHARDT, INC. (FREITAG WEINHARDT). THE HIGHEST BID WAS SUBMITTED BY EDGEMONT CONSTRUCTION COMPANY (EDGEMONT), IN THE AMOUNT OF $2,600,000. A REVIEW OF THE BIDS EVIDENCED THAT THE SAME PERSON, MR. LEONARD KAYE, HAD SIGNED BOTH THE BID OF EDGEMONT AND THE BID OF KAYE- FOWLER.

IN YOUR LETTER OF NOVEMBER 1, 1971, TO THIS OFFICE, YOU STATE THAT:

IT IS GENERALLY KNOWN THAT EDGEMONT CONSTRUCTION COMPANY IS, IF NOT WHOLLY OWNED, CONTROLLED AND MANAGED BY THE SAID LEONARD KAYE *** THE DISPARITY OF APPROXIMATELY $650,000.00 BETWEEN THE LOW AND HIGH BID, BOTH SIGNED BY THE SAME INDIVIDUAL, ON ITS FACE IMPUTES AN INTENT TO PREVENT FULL AND FREE COMPETITIVE, NON-COLLUSIVE BIDDING PROCEDURES AS REQUIRED BY THE APPLICABLE REGULATIONS AND CONTRACT CERTIFICATIONS WHICH ARE A PART OF THE BID DOCUMENTS.

BY LETTER DATED NOVEMBER 11, 1971, TO THE CHICAGO DISTRICT OFFICE, CORPS OF ENGINEERS, A COPY OF WHICH WAS FURNISHED THIS OFFICE, YOU CONTEND THAT THE MULTIPLE BIDDING BY MR. LEONARD KAYE COULD ONLY BE DESIGNED TO OBTAIN AN ADVANTAGE OVER OTHER BIDDERS, BECAUSE THERE CAN BE NO OTHER LOGICAL EXPLANATION FOR MULTIPLE BIDS WHERE ONE IS THE HIGH BID AND THE OTHER THE LOW BID WITH A SPREAD OF $650,000. YOU CITE OUR DECISION AT 39 COMP. GEN. 892 (1960) FOR THE PREPOSITION THAT MULTIPLE BIDDING SHOULD NOT BE SANCTIONED WHERE AN UNFAIR ADVANTAGE MAY BE GAINED OVER OTHER BIDDERS. THAT DECISION WE HELD THAT THE BIDS OF A CORPORATION AND AN AFFILIATED CONCERN SUBMITTED IN RESPONSE TO THE SAME IFB WERE NOT REQUIRED TO BE REJECTED BECAUSE OF SUCH AFFILIATION WHEN SUCH MULTIPLE BIDDING WAS NOT PREJUDICIAL TO THE UNITED STATES OR TO OTHER BIDDERS. WE ALSO TOOK COGNIZANCE OF THE FACT THAT IT IS NOT UNUSUAL FOR MULTIPLE BIDS TO BE SUBMITTED BY AN INDIVIDUAL OR INDIVIDUALS WHO MIGHT HAVE LEGITIMATE REASONS FOR SUBMITTING BIDS OF TWO OR MORE COMPANIES COMMONLY OWNED AND/OR CONTROLLED. SEE ALSO, B 162187, NOVEMBER 29, 1967, WHEREIN WE HELD:

IN ANY EVENT, THE PROCURING AGENCY IS GENERALLY REQUIRED TO ACCEPT THE LOWEST RESPONSIVE BID SUBMITTED BY A RESPONSIBLE BIDDER. 10 U.S.C. 2305. THEREFORE, WE MAY CONCLUDE THAT WHERE THE CONSIDERATION OF BIDS SUBMITTED FOR LEGITIMATE BUSINESS REASONS BY AN INDIVIDUAL THROUGH TWO OWNED OR CONTROLLED COMPANIES WILL NOT PREJUDICE THE GOVERNMENT OR AFFORD EITHER COMPANY AN ADVANTAGE NOT ENJOYED BY OTHER BIDDERS, WE WILL TAKE NO EXCEPTION TO THE AWARD OF A CONTRACT TO EITHER COMPANY, PROVIDED THAT THE COMPANY HAS BEEN AFFIRMATIVELY DETERMINED TO BE THE RESPONSIBLE BIDDER WHICH SUBMITTED THE LOW RESPONSIVE BID, AS IN THE PRESENT CASE.

CONCERNING YOUR CONTENTION THAT THE CERTIFICATION OF INDEPENDENT PRICE DETERMINATION REQUIRED OF EACH BIDDER UNDER PARAGRAPH 4, STANDARD FORM 19- B, OCTOBER 1969 EDITION, NECESSITATES THAT THE BID OF KAYE FOWLER BE DECLARED INELIGIBLE, IT IS OUR OPINION THAT THE CERTIFICATION OF KAYE- FOWLER AND EDGEMONT SHOULD BE REGARDED ONLY AS INDICATING THAT THE PRICES QUOTED BY THEM WERE NOT DISCUSSED WITH OR COMMUNICATED TO ANY COMPETITOR OF THE TWO FIRMS OR TO ANY PROSPECTIVE BIDDER OTHER THAN THEMSELVES, AND THAT NO ATTEMPT HAD BEEN MADE TO INDUCE ANY OTHER PERSON OR FIRM TO SUBMIT OR NOT TO SUBMIT AN OFFER FOR THE PURPOSE OF RESTRICTING COMPETITION. THUS, WHERE SEPARATE BIDS HAVE BEEN SUBMITTED BY AFFILIATED CONCERNS AND WHERE THESE BIDS WERE COMPUTED BY ONE PERSON OR ARRIVED AT AS THE RESULT OF DISCUSSIONS BETWEEN THE TWO CONCERNS, IF SUCH BIDS WERE SUBMITTED FOR APPARENTLY LEGITIMATE BUSINESS REASONS, IT WOULD BE IMMATERIAL WHETHER THE PRICES WHICH THEY QUOTED WERE DISCUSSED BETWEEN THEM BEFORE SUBMITTING SUCH SEPARATE BIDS. WE DO NOT BELIEVE THAT SUCH DISCUSSIONS WOULD CONSTITUTE A REASONABLE BASIS FOR CONCLUDING THAT THE CONCERNS HAD ENTERED INTO A CONSPIRACY TO ELIMINATE COMPETITION FROM OTHER COMPANIES. SEE B- 167725, OCTOBER 3, 1969.

IN ORDER TO FULLY ADDRESS YOUR ALLEGATION THAT THE TWO BIDS SIGNED BY MR. LEONARD KAYE MANIFESTED AN INTENT TO PREVENT FULL AND FREE COMPETITION, THIS OFFICE REQUESTED FROM MR. KAYE AN EXPLANATION FOR THE MULTIPLE BIDS. IN RESPONSE TO OUR REQUEST MR. KAYE EXPLAINED THAT THE BID SUBMITTED IN THE NAME OF EDGEMONT WAS SUBMITTED WITH A PRELIMINARY PRICE WITH THE INTENTION OF MODIFYING IT IN THE LAST HOUR BEFORE BID OPENING AFTER OBTAINING NECESSARY SUBCONTRACTOR BIDS. WE HAVE BEEN INFORMED BY THE CORPS OF ENGINEERS THAT THE EDGEMONT BID WAS IN FACT SUBMITTED PRIOR TO THE KAYE-FOWLER BID. MR. KAYE ALLEGED THAT HE REQUESTED VARIOUS MECHANICAL CONTRACTORS TO SUBMIT A BID FOR THE HEATING AND AIR CONDITIONING WORK, INCLUDING FREITAG-WEINHARDT. HOWEVER, DURING THE TIME HE WAS GATHERING BIDS FOR THE PURPOSE OF MODIFYING THE EDGEMONT BID HE BECAME SUSPICIOUS THAT FREITAG-WEINHARDT WAS GOING TO SUBMIT A BID AS A PRIME CONTRACTOR. IT ALSO APPEARED THAT THE MECHANICAL WORK FOR EDGEMONT WOULD PROBABLY BE FURNISHED BY FREITAG WEINHARDT. AS NOTED IN YOUR LETTER OF NOVEMBER 11, 1971, FREITAG WEINHARDT WAS THE ONLY SUBCONTRACTOR BIDDING ON THE MECHANICAL WORK TO ALL OF THE PRIME BIDDERS EXCEPT FOR KAYE- FOWLER. THUS, MR. KAYE ADVISES THAT HE REALIZED FREITAG-WEINHARDT COULD POSSIBLY BECOME THE LOW PRIME BIDDER TO THE CORPS OF ENGINEERS BY GIVING EDGEMONT, AND OTHER CONTRACTORS, HIGH MECHANICAL SUB-BIDS WHILE INCORPORATING A REALISTIC MECHANICAL PRICE INTO ITS BID AS A PRIME CONTRACTOR. TO COUNTER THE FAVORABLE POSITION OF FREITAG-WEINHARDT, MR. KAYE SOUGHT OUT ANOTHER MECHANICAL CONTRACTOR, THE FOWLER COMPANY, AND WORKED OUT AN ARRANGEMENT WITH THEM TO BID AS A JOINT VENTURE INCORPORATING THEIR ESTIMATE OF THE COST OF PERFORMING THE MECHANICAL WORK. SINCE MR. KAYE HAD ALREADY SUBMITTED A BID ON BEHALF OF EDGEMONT, HE DECIDED TO USE L. KAYE CONSTRUCTION COMPANY IN THE JOINT VENTURE WITH THE FOWLER COMPANY IN ORDER TO AVOID POSSIBLE CONFUSION TO THE CORPS OF ENGINEERS RESULTING FROM THE WITHDRAWAL OF EDGEMONT'S ORIGINAL BID AND THE SUBMISSION OF ANOTHER EDGEMONT BID AS PART OF A JOINT VENTURE. MR. KAYE NOTED THAT ALTHOUGH HE INTENDED TO HAVE THE EDGEMONT BID REMOVED WHEN THE KAYE-FOWLER BID WAS SUBMITTED, THIS WAS INADVERTENTLY NOT ACCOMPLISHED.

WE ARE OF THE OPINION THAT MR. KAYE'S RESPONSE SETS FORTH A LEGITIMATE BUSINESS REASON FOR THE TWO BIDS. FURTHERMORE, THE RECORD IN THE INSTANT CASE IS VOID OF ANY EVIDENCE THAT EITHER THE GOVERNMENT OR THE OTHER BIDDERS WERE PREJUDICED BECAUSE COMPETING BIDS WERE SUBMITTED ON BEHALF OF BOTH KAYE-FOWLER AND EDGEMONT, OR THAT THE TWO BIDS WERE SUBMITTED IN AN ATTEMPT TO CIRCUMVENT STATUTORY OR REGULATORY REQUIREMENTS. THEREFORE, THERE IS NO BASIS FOR FINDING THAT THE BID OF KAYE-FOWLER SHOULD BE REJECTED BECAUSE OF ITS RELATIONSHIP TO THE BID OF EDGEMONT.

YOU ALSO CONTEND THAT KAYE-FOWLER DOES NOT HAVE COMMITMENTS WITH SUBCONTRACTORS AND SUPPLIERS REQUIRED TO PERFORM THE PROCUREMENT, AND THAT IT WILL HAVE TO "BID SHOP" TO OBTAIN A COST STRUCTURE IN LINE WITH ITS BID TO THE GOVERNMENT. IT IS YOUR POSITION THAT THE OVER-ALL EFFECT UPON THE QUALITY AND TIMELINESS OF PERFORMANCE UNDER SUCH CONDITIONS IS DETRIMENTAL TO THE GOVERNMENT'S INTEREST AND, THEREFORE, THE LOW BID OF KAYE-FOWLER SHOULD BE REJECTED.

ALTHOUGH YOU CONCEDE THAT THE SUBJECT IFB DID NOT REQUIRE A BIDDER TO NAME HIS SUBCONTRACTORS, YOU CITE OUR DECISIONS 46 COMP. GEN. 146 (1966) AND 44 COMP. GEN. 526 (1965), WHICH HOLD THAT THE FAILURE OF A BIDDER TO SUBMIT SUCH A LISTING WHEN REQUIRED BY THE IFB REQUIRES REJECTION OF HIS BID. BOTH OF THESE DECISIONS ARE EXAMPLES OF CASES CONCERNED WITH THE SPECIFIC APPLICATION OF A GENERAL SERVICES ADMINISTRATION (GSA) REGULATION REQUIRING A SUBCONTRACTOR LISTING FOR THE PURPOSE OF RESTRICTING "BID SHOPPING" BY ITS CONTRACTORS FOR CONSTRUCTION WORK.

SINCE THERE WAS NO SUBCONTRACTOR LISTING REQUIREMENT IN THE SUBJECT PROCUREMENT, AND NO STATUTORY OR REGULATORY REQUIREMENT FOR SUCH A LISTING, THERE IS NO BASIS FOR THE CORPS OF ENGINEERS TO REJECT THE BID OF KAYE-FOWLER FOR FAILING TO IDENTIFY THE SUBCONTRACTORS USED IN THE COMPILATION OF ITS BID, OR TO BE USED IN PERFORMANCE OF THE CONTRACT.

YOU ALSO CONTEND THAT KAYE-FOWLER USED THE BIDS GIVEN TO EDGEMONT BY YOUR CLIENT AND OTHER POTENTIAL SUBCONTRACTORS IN FORMULATING ITS BID, AND THAT SUCH USE IS AN UNLAWFUL USE AND ENCROACHMENT UPON THE PROPRIETARY RIGHTS OF SUBCONTRACTORS, ALLOWS FOR AN UNFAIR ADVANTAGE OVER OTHER BIDDERS, AS WELL AS CREATING AN IMPROPER POTENTIAL FOR THE GOVERNMENT TO PROFIT AS THE BENEFICIARY OF THE UNAUTHORIZED AND UNLAWFUL USE. HOWEVER, IT IS KAYE- FOWLER'S POSITION THAT IT PROPOSES TO USE THE FOWLER COMPANY, RATHER THAN YOUR CLIENT, TO PERFORM THE MECHANICAL CONSTRUCTION WORK, SINCE THE FOWLER COMPANY IS A PARTNER IN THE JOINT VENTURE.

THERE IS NO AFFIRMATIVE SHOWING THAT KAYE-FOWLER USED ANY OF THE OTHER SUBCONTRACTOR BIDS RECEIVED BY EDGEMONT. WE ARE OF THE OPINION THAT IF SUCH USE IN FACT WAS MADE OF EDGEMONT'S SUBCONTRACTORS THAT MATTER WOULD BE OF CONCERN ONLY TO THE SUBCONTRACTORS, TO EDGEMONT AND TO KAYE-FOWLER. IN THE ABSENCE OF REQUIREMENT TO LIST SUBCONTRACTORS IN THE BID, WE HAVE HELD THAT WHEN A SUBCONTRACTOR SUBMITS A BID FOR USE BY A PRIME CONTRACTOR IN SUBMITTING ITS BID TO THE GOVERNMENT THERE IS NO BINDING OBLIGATION BETWEEN THE PRIME CONTRACTOR AND THE SUBCONTRACTOR WHEN THE PRIME CONTRACTOR'S BID IS ACCEPTED. SEE B 161105, MARCH 29, 1967. THE USE BY A PRIME CONTRACTOR IN THE FORMULATION OF ITS BID OF A SUBCONTRACTOR'S BID TO ANOTHER PRIME CONTRACTOR, DOES NOT ENCROACH UPON ANY LEGAL RIGHTS OF THE SUBCONTRACTOR. CERTAINLY WHERE "BID SHOPPING" IS NOT PROHIBITED, A FIXED PRICE BID MAY BE PREMISED ON NOTHING MORE THAN THE WISDOM OF THE BIDDER AS TO THE COST OF THE JOB WITHOUT ANY RELIANCE ON BIDS BY SUBCONTRACTORS. WOULD NOT FOLLOW, THEREFORE, THAT KAYE-FOWLER'S ALLEGED USE OF EDGEMONT'S SUBCONTRACTOR BIDS AS A GUIDE IN DETERMINING ITS PRIME BID WOULD GIVE KAYE -FOWLER AN UNFAIR ADVANTAGE OVER OTHER BIDDERS. FURTHER, THERE WOULD BE NO POTENTIAL FOR THE GOVERNMENT TO PROFIT BY KAYE-FOWLER'S USE OF EDGEMONT'S SUBCONTRACTORS, SINCE THE AWARD OF THE SUBJECT PROCUREMENT TO KAYE-FOWLER WOULD CONSTITUTE AN UNCONDITIONAL OBLIGATION ON THE PART OF THE GOVERNMENT TO PAY A FIXED PRICE FOR THE WORK DESCRIBED, AND ON THE PART OF KAYE-FOWLER TO PERFORM THE WORK FOR THAT PRICE. ANY RISK OF INCREASED COSTS WOULD FALL UPON THE CONTRACTOR, AND ANY SAVINGS FROM DECREASED COSTS WOULD INURE SOLELY TO ITS BENEFIT.

UNDER THE CIRCUMSTANCES WE ARE UNABLE TO CONCLUDE THAT KAYE-FOWLER'S BID WAS IMPROPER, OR THAT ANY LEGAL BASIS EXISTS FOR OBJECTING TO THE PROPOSED AWARD TO KAYE-FOWLER.

ACCORDINGLY, YOUR PROTEST IS DENIED.