B-181628, SEP 20, 1974

B-181628, SEP 20, 1974

CLAIMS SETTLEMENT DENYING BID PREPARATION COSTS AFTER CANCELLATION OF IFB FOR PACKAGING GOVERNMENT-OWNED BUTTER IS AFFIRMED WHERE AFTER BID OPENING PROCURING ACTIVITY WAS ADVISED BY USDA THAT SUFFICIENT BUTTER SURPLUSES DID NOT EXIST AND THEREFORE SERVICES WERE NO LONGER REQUIRED, AS THERE HAS BEEN NO SHOWING OF BAD FAITH OR ARBITRARY OR CAPRICIOUS ACTION BY CONTRACTING OFFICER IN SOLICITING BIDS BASED ON PRIOR ADVICE OF USDA THAT SUFFICIENT SURPLUSES EXISTED.

DAIRY SALES CORPORATION:

THIS DECISION IS RENDERED PURSUANT TO AN APPEAL FROM THE DENIAL ON APRIL 15, 1974, BY THE TRANSPORTATION AND CLAIMS DIVISION OF OUR OFFICE OF A CLAIM BY DAIRY SALES CORPORATION (DAIRY) FOR EXPENSES INCURRED BY THAT FIRM RESULTING FROM THE CANCELLATION OF SOLICITATION DSA-130-73-B 0679 ISSUED BY THE DEFENSE SUBSISTENCE REGION, CHICAGO, ILLINOIS.

THE SUBJECT SOLICITATION, ISSUED ON APRIL 9, 1973, CONTEMPLATED A REQUIREMENTS CONTRACT TO RECEIVE, STORE, PRINT, PACKAGE AND SHIP GOVERNMENT -OWNED BUTTER. THE UNITED STATES DEPARTMENT OF AGRICULTURE (USDA), WHICH HAS HAD SURPLUS BUTTER IN STOCK SINCE THE 1940'S DONATES THESE STOCKS TO VARIOUS PROGRAMS (I.E., SCHOOL LUNCH PROGRAMS) AND WHEN SUFFICIENT STOCK REMAINS, ALSO TO THE DEPARTMENT OF DEFENSE (DOD) FOR ITS REQUIREMENTS. THE PURPOSE OF THE RESULTING CONTRACT WAS TO CONVERT THE BULK SURPLUS BUTTER INTO USEABLE FORM SUCH AS PATTIES AND ONE POUND PACKAGES FOR USE BY DOD FACILITIES.

ON MARCH 29, 1973, THE DEFENSE PERSONNEL SUPPORT CENTER ADVISED THE DEFENSE SUBSISTENCE REGION IN CHICAGO THAT BUTTER WOULD BE AVAILABLE FOR FISCAL YEAR 1974 FROM THE USDA AND REQUESTED THAT ACTION BE TAKEN TO CONTRACT FOR THE SERVICES NEEDED. THEREAFTER, THE INSTANT INVITATION FOR BIDS (IFB) WAS ISSUED. ON MAY 24, 1973, THE BIDS WERE OPENED AND EVALUATION BEGUN WITH CONFIRMATION OF TRANSPORTATION RATES. ON JUNE 8, 1973, THE CHIEF OF THE PURCHASING DIVISION AUTHORIZED THE CONTRACTING OFFICER TO CANCEL THE IFB SINCE ADVICE HAD BEEN RECEIVED THAT THE USDA WOULD NOT BE ABLE TO SUPPLY BULK BUTTER FOR FY 1974. ON JUNE 11, 1973, THE IFB WAS CANCELED ON THE BASIS THAT THE SUPPLIES AND SERVICES WERE NO LONGER REQUIRED.

DAIRY HAS MADE A CLAIM FOR THE EXPENSES IT INCURRED PRIOR TO THE CANCELLATION OF THE IFB. THESE INCLUDE BID PREPARATION COSTS AND ALSO THE COST OF PURCHASING CERTAIN MATERIALS NECESSARY FOR THE PERFORMANCE OF THE CONTRACT. DAIRY STATES THAT IF IT HAD NOT BEEN THE SUCCESSFUL BIDDER UNDER THE IFB, IT WOULD HAVE SOLD THE SUPPLIES (WRAPPERS AND BOXES) TO THE SUCCESSFUL BIDDER AT NO LOSS, WHICH IT HAD DONE IN THE PAST. HOWEVER, SINCE THE IFB WAS CANCELED, THERE WAS NO SUCCESSFUL BIDDER AND DAIRY SUFFERED A LOSS IN THE AMOUNT OF $8,801.26.

DAIRY CONTENDS THAT THE BIDS WERE NOT INVITED IN GOOD FAITH IN THAT THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN THAT THERE WAS NOT SUFFICIENT BUTTER AVAILABLE TO IMPLEMENT THE TERMS OF THE CONTRACT.

A REVIEW OF THE RECORD BEFORE OUR OFFICE SHOWS THAT THE IFB WAS NOT ISSUED UNTIL INFORMATION HAD BEEN RECEIVED THAT BUTTER WOULD BE AVAILABLE FOR FY 1974. THIS INFORMATION WAS CONTAINED IN THE MARCH 29, 1973, ADVISORY REFERRED TO ABOVE AND THE IFB WAS ISSUED 11 DAYS LATER. THE RECORD FURTHER REVEALS THAT THE PROCUREMENT WAS HANDLED IN THE NORMAL MANNER UNTIL THE NOTICE OF JUNE 8, 1974, WAS RECEIVED BY THE CONTRACTING OFFICER OF THE UNAVAILABILITY OF THE SURPLUS BUTTER AND, THEREAFTER, THE IFB WAS CANCELED ON JUNE 11, 1973.

THE KNOWLEDGE THAT THERE WOULD BE INSUFFICIENT BUTTER SURPLUSES TO SUPPLY DOD, CANNOT BE IMPUTED TO THE CONTRACTING OFFICER, PRIOR TO HIS ACTUAL KNOWLEDGE OF JUNE 8, 1974, EVEN IF THE USDA HAD MADE THE DECISION EARLIER THAN JUNE 8. BATESON-STOLTE, INC. V. UNITED STATES, 145 CT. CL. 387, 391 (1959) AND FANSTEEL METALLURGICAL CORP. V. UNITED STATES, 145 CT. CL. 496, 501 (1959).

OUR OFFICE AND THE COURTS HAVE HELD THAT BIDDERS HAVE NO ENFORCEABLE RIGHT TO BID PREPARATION EXPENSES IN THE EVENT THEY ARE NOT AWARDED A CONTRACT UNLESS IT CAN BE SHOWN THAT THE BIDS WERE NOT INVITED IN GOOD FAITH OR WHERE AWARD WAS MADE IN AN ARBITRARY AND CAPRICUOUS MANNER. 176221, MARCH 6, 1973, AND ROBERT F. SIMMONS AND ASSOCIATES V. UNITED STATES, 360 F. 2D 962 (1966).

SINCE SECTION 2-404.1(B)(III) OF THE ARMED SERVICES PROCUREMENT REGULATION PERMITS CANCELLATION OF A SOLICITATION WHEN THE SUPPLIES OR SERVICES ARE NO LONGER REQUIRED AND THERE HAS BEEN NO SHOWING THAT THE CONTRACTING OFFICER INVITED BIDS IN OTHER THAN GOOD FAITH OR ACTED IN AN ARBITARARY OR CAPRICIOUS MANNER, THE CLAIMS SETTLEMENT OF APRIL 15, 1974, IS AFFIRMED.