B-128467, OCT. 18, 1956

B-128467, OCT. 18, 1956

TO THE SECRETARY OF COMMERCE:

REFERENCE IS MADE TO A LETTER OF JULY 23, 1956, FROM THE ASSISTANT SECRETARY FOR ADMINISTRATION IN REPLY TO OUR LETTER OF JULY 6, FORWARDING A PROTEST BY THE ARLINGTON YELLOW CAB COMPANY WITH REGARD TO THE AWARDING OF THE GROUND TRANSPORTATION CONCESSION AT THE WASHINGTON NATIONAL AIRPORT.

INVITATIONS FOR PROPOSALS TO OPERATE THE CONCESSION FOR A FIVE YEAR PERIOD BEGINNING JULY 1, 1956, WERE SENT OUT UNDER DATE OF MAY 16, 1956. PROPOSALS WERE TO BE SUBMITTED BY CLOSE OF BUSINESS MAY 31. PARAGRAPH IV OF THE INVITATION PROVIDED:

"AS SOON AS POSSIBLE AFTER THE CLOSING DATE FOR SUBMISSION OF PROPOSALS, THE OFFERS WILL BE EVALUATED ON THE BASIS OF THE FINANCIAL RETURN TO THE GOVERNMENT, THE PROPOSED METHOD OF OPERATION, AND THE FITNESS AND ABILITY OF THE PROPONENT TO SERVE THE PUBLIC. SUBJECT TO THE RIGHT OF THE GOVERNMENT TO REJECT ALL PROPOSALS, FURTHER NEGOTIATION MAY BE HAD WITH THE FIRM/S) WHICH MAKE THE MOST ADVANTAGEOUS OFFER/S).'

PROPOSALS WERE OPENED BY THE AIRPORT AUTHORITIES ON JUNE 1. THE TWO BIDDERS IN CONTENTION WERE AIRPORT TRANSPORT, INC., THE INCUMBENT, AND THE ARLINGTON YELLOW CAB CO., INC. THESE FIRMS OFFERED A RETURN TO THE GOVERNMENT BASED ON THE FOLLOWING RATES ON GROSS RECEIPTS ACCRUING FROM TRANSPORTATION ORIGINATING AT THE AIRPORT:

CHART

GROSS RECEIPTS FROM TRANSPORTATION ARLINGTON

ORIGINATING AT AIRPORT AIRPORT TRANSPORT YELLOW CAB

UP TO $750,000 13 1/2 PERCENT 17 PERCENT

$750,000 TO $1,000,000 14 PERCENT 19 PERCENT

OVER $1,000,000 15 PERCENT 21 PERCENT

ON JUNE 6, THE DIRECTOR OF THE AIRPORT TRANSMITTED TO THE ASSISTANT ADMINISTRATOR FOR ADMINISTRATION OF THE CIVIL AERONAUTICS ADMINISTRATION A RECOMMENDATION THAT THE BID OF AIRPORT TRANSPORT BE ACCEPTED. MEETINGS WERE HELD SEPARATELY WITH EACH BIDDER BETWEEN JUNE 15 AND 18 TO EXPLORE THE OFFERS FURTHER AND FOR THE PURPOSES OF NEGOTIATION. DURING NEGOTIATIONS AIRPORT TRANSPORT AGREED TO INCREASE THE RATE OF RETURN TO THE GOVERNMENT TO 15 PERCENT ON REVENUES UP TO $750,000, 16 PERCENT ON REVENUES FROM $750,000 TO $1,000,000, AND 17 PERCENT ON REVENUES IN EXCESS OF $1,000,000. IN ADDITION, AIRPORT TRANSPORT AGREED TO RAISE ITS MINIMUM GUARANTEE TO $175,000. YELLOW CAB REFUSED TO INCREASE THE RATES OVER ITS ORIGINAL BID. THE RECORD DOES NOT INDICATE THAT YELLOW CAB WAS GIVEN AN OPPORTUNITY TO INCREASE THE GUARANTEE OF $125,000 STIPULATED IN THE INVITATION. BY LETTER OF JUNE 27, 1956, YELLOW CAB WAS ADVISED THAT THE AWARD HAD BEEN MADE TO AIRPORT TRANSPORT.

BY LETTER OF JUNE 28, 1956, YELLOW CAB PROTESTED THE AWARD ON THE BASIS THAT IT OFFERED THE MOST FAVORABLE RETURN TO THE GOVERNMENT AND THAT IT HAD SUBMITTED "ALL EVIDENCE REQUIRED BY THE C.A.A. TO SHOW ITS GOOD FAITH AND ABILITY TO PERFORM SATISFACTORILY.'

BY FURTHER LETTER OF JULY 19, YELLOW CAB CONTENDED THAT THE ADMINISTRATOR HAD NO AUTHORITY TO AWARD THE CONTRACT PURSUANT TO NEGOTIATION BUT WAS BOUND TO CONFORM TO THE ADVERTISING REQUIREMENTS CONTAINED IN 41 U.S.C. 5. AS TO THIS LATTER CONTENTION, SECTION 3 OF THE ACT OF JUNE 29, 1940, 54 STAT. 688, PROVIDES:

"THE ADMINISTRATOR (OF C.A.A.) IS EMPOWERED TO LEASE, UPON SUCH TERMS AS HE MAY DEEM PROPER, SPACE OR PROPERTY WITHIN OR UPON THE AIRPORT FOR PURPOSES ESSENTIAL OR APPROPRIATE TO THE OPERATION OF THE AIRPORT.'

WE HAVE HELD THAT THE AUTHORITY GRANTED IN SECTION 3 IS WHOLLY INCONSISTENT WITH ANY ADVERTISING REQUIREMENT AND THEREFORE, WHILE IT DOES NOT EXPRESSLY AUTHORIZE LEASING WITHOUT ADVERTISING, IMPLIEDLY PERMITS THE AWARD OF THE TYPE OF CONTRACT IN QUESTION THROUGH NEGOTIATION AND WITHOUT ADVERTISING. THE PROVISION HAS BEEN SO INTERPRETED BY YOU AND YOUR PREDECESSORS SINCE ITS ENACTMENT AND THE COURTS GRANT GREAT CONSIDERATION TO SUCH ADMINISTRATIVE INTERPRETATIONS, ESPECIALLY WHEN OF LONG STANDING. UNITED STATES V. JACKSON, 280 U.S. 183; KERN RIVER CO. V. UNITED STATES, 257 U.S. 147. ACCORDINGLY, WE FIND NO BASIS FOR DISTURBING THE AWARD FOR THE REASON THAT IT WAS MADE PURSUANT TO NEGOTIATION.

THE LETTER OF JULY 23, STATES:

"THE INVITATION FOR PROPOSALS TO OPERATE THE GROUND TRANSPORTATION CONCESSION AT THE AIRPORT MADE IT CLEAR THE COMPETITIVE BIDDING PROCEDURES ORDINARILY FOLLOWED IN THE AWARD OF GOVERNMENT CONTRACTS WERE NOT TO BE FOLLOWED IN THIS CASE. EVERY EFFORT WAS MADE TO ASSURE FULL CONSIDERATION TO ALL PERSONS OR FIRMS WHO MIGHT HAVE DESIRED TO PROVIDE GROUND TRANSPORTATION SERVICES AT THE AIRPORT. ALL THOSE WHO SUBMITTED PROPOSALS WERE ADVISED IN THE INVITATION THAT THEIR OFFERS WOULD BE EVALUATED NOT MERELY ON THE BASIS OF FINANCIAL RETURN TO THE GOVERNMENT BUT ALSO UPON THE BASIS OF THEIR PROPOSED METHOD OF OPERATION AND THEIR RELATIVE FITNESS AND ABILITY TO SERVE THE PUBLIC. THE ACTUAL CONSIDERATIONS WHICH WENT INTO THE DETERMINATION OF THE AWARD WHICH WAS MADE ARE SUMMARIZED IN THE MEMORANDUM ENTITLED,"RESULTS OF NEGOTIATIONS FOR GROUND TRANSPORTATION AT THE WASHINGTON NATIONAL AIRPORT AND RECOMMENDATION FOR AWARD OF SUCH NCESSION.' A COPY OF THIS MEMORANDUM IS ENCLOSED.'

PARAGRAPH IV OF THE INVITATION QUOTED ABOVE MAKES IT CLEAR THAT THE AWARD WAS TO BE MADE PURSUANT TO NEGOTIATION AND NOT AS A RESULT OF FORMAL ADVERTISING.

THE REASONS FOR AWARDING THE CONTRACT TO AIRPORT TRANSPORT, GIVEN IN YOUR MEMORANDUM CITED IN THE PARAGRAPH QUOTED ABOVE, ARE LABELLED "A" IN THE SUMMARY BELOW; OUR COMMENTS ON THE REASONS ARE MARKED "B.'

1.A. THE FIRM HAS ESTABLISHED A HIGH STANDARD OF SERVICE. COMMENDABLE OPERATION.

2.A. AIRPORT TRANSPORT OFFERED THE HIGHEST GUARANTEED MINIMUM, $175,000 PER YEAR.

B. THE INVITATION FOR PROPOSALS STIPULATED A MINIMUM GUARANTEE OF $125,000 PER CONTRACT YEAR. THE FORM DID NOT INDICATE THAT A HIGHER GUARANTEE MIGHT BE MADE NOR WAS SPACE PROVIDED TO INSERT ONE. AIRPORT TRANSPORT OFFERED THE HIGHER GUARANTEE DURING THE COURSE OF NEGOTIATIONS. THERE IS NO EVIDENCE IN THE MINUTES OF THE MEETING WITH YELLOW CAB OR IN OTHER RECORDS THAT YELLOW CAB WAS OFFERED AN OPPORTUNITY TO RAISE ITS GUARANTEE, OR THAT THE PROSPECT OF A SUPPLEMENTAL AIRPORT WITH POSSIBLE REDUCED REVENUE TO THE CONCESSIONAIRE WAS DISCUSSED. FURTHER, BASED ON A PROJECTED REVENUE OF $1,200,000, WHICH EXPERIENCE INDICATES IS REASONABLE, THE RETURN TO THE GOVERNMENT ON A CONTRACT AT THE RATES OFFERED BY YELLOW CAB WOULD BE $217,000, OR $42,000 IN EXCESS OF THE MINIMUM GUARANTEE OFFERED BY AIRPORT TRANSPORT. UNDER THESE CIRCUMSTANCES, WE BELIEVE THAT THE INCREASED GUARANTEED MINIMUM WAS A FACTOR OF ONLY SPECULATIVE SIGNIFICANCE IN FAVOR OF AIRPORT TRANSPORT.

3.A. THE POSSIBILITY OF SERVICE BEING INTERRUPTED BECAUSE OF LABOR DIFFICULTY WOULD BE LESS WITH THE INCUMBENT, WHO HAS ALREADY ESTABLISHED SATISFACTORY RELATIONS WITH THE LABOR UNION, THAN WITH A NEW OPERATOR.

B. WHILE THE INCUMBENT OPERATOR BY REASON OF HAVING AN EXISTING LABOR AGREEMENT MAY HAVE BEEN ABLE TO NEGOTIATE A NEW AGREEMENT MORE EASILY THAN A NEW CONTRACTOR, NO EVIDENCE WAS FURNISHED TO SUPPORT THE ASSUMPTION THAT A NEW CONTRACTOR WOULD HAVE SUCH DIFFICULTY AS TO JEOPARDIZE THE CONTINUANCE OF SERVICE. IN ITS BID, YELLOW CAB STATED THAT IF AWARDED THE CONTRACT IT WOULD NEGOTIATE WITH THE UNION. NO DISCUSSION OF THE SUBJECT APPEARS IN THE MINUTES OF THE MEETING WITH YELLOW CAB. THIS REASON APPEARS TO BE AN UNSUPPORTED OPINION.

THE MEMORANDUM ENCLOSED WITH THE LETTER OF JULY 23, INDICATES THAT YELLOW CAB'S BID WAS REJECTED FOR THE FOLLOWING REASONS MARKED "A.'

THE PROTESTANT'S ANSWERS CONTAINED IN A LETTER DATED AUGUST 6, ARE SUMMARIZED IN PARAGRAPHS MARKED "B" AND OUR OWN COMMENTS ARE MARKED "C.'

1.A. YELLOW CAB'S BALANCE SHEET SHOWS A NET WORTH OF $30,000. WHILE AFFILIATE COMPANIES HAVE COMBINED ADDITIONAL ASSETS OF $229,252, AN UNCONDITIONAL STATEMENT COULD NOT BE OBTAINED THAT THE ASSETS OF ALL OF THE AFFILIATES WOULD BE PLEDGED TO THE PERFORMANCE OF THE CONTRACT.

B. AT THE MEETING OF JUNE 15, REPRESENTATIVES OF YELLOW CAB UNEQUIVOCALLY AGREED TO MEET ANY CONDITION PRECEDENT TO AWARD TO DEMONSTRATE FINANCIAL RESPONSIBILITY.

THE LETTER OF AUGUST 6, STATES,"OUR INTENTION TO SO PLEDGE THESE ASSETS WAS CLEAR IN OUR BID AND WAS REAFFIRMED IN THE JUNE 15TH MEETING.' FURTHER, YELLOW CAB REPRESENTATIVES INDICATED THAT THEY COULD IN TWO HOURS PRESENT A CERTIFIED CHECK FOR $200,000.

C. THE FINANCIAL POSITION OF YELLOW CAB IS NOT OF PRIMARY SIGNIFICANCE. THE REAL MEASURE OF THE FINANCIAL RESPONSIBILITY OF THE BIDDER WAS THE ADDITIONAL AMOUNT WHICH THE STOCKHOLDERS WERE ABLE AND WILLING TO INVEST IN THE AIRPORT OPERATION WHEN AND IF AWARDED THE BID. YELLOW CAB'S BID STATED THAN AN ADDITIONAL $200,000 WOULD BE INVESTED BY STOCKHOLDERS AND A FURTHER $120,000 WOULD BE OBTAINED THROUGH FINANCING NEW ROLLING STOCK. THE MINUTES OF THE JUNE 15 MEETING INDICATE THAT YELLOW CAB REPRESENTATIVES STATED THAT THE ASSETS OF THE SUBJECT COMPANY WERE ACTUALLY ADDITIONAL FACILITIES WHICH WOULD BE AVAILABLE TO THE CONCESSION OPERATION OVER AND BEYOND THE NEW FACILITIES TO BE ACQUIRED WITH NEW CAPITAL; THAT IT COULD FINANCE THE OPERATION WITHOUT THESE ASSETS; AND THAT THE NEW CAPTIAL OF $200,000 WOULD REPRESENT AN INVESTMENT IN YELLOW CAB EARMARKED FOR OPERATING THE CONCESSION AND COULD BE PRODUCED IN THE FORM OF A CERTIFIED CHECK IMMEDIATELY. FURTHER, YELLOW CAB REPRESENTATIVES OFFERED TO MEET ANY CONDITION PRECEDENT TO THE AWARD TO DEMONSTRATE FINANCIAL RESPONSIBILITY. C.A.A. REPRESENTATIVES DID NOT THE $200,000 NOR DID THEY MAKE IT CLEAR WHAT FINANCIAL ARRANGEMENTS WOULD BE CONSIDERED ACCEPTABLE. THE ADDITIONAL CAPITAL TOGETHER WITH THE $120,000 FINANCING OF NEW ROLLING STOCK WOULD COMPARE FAVORABLY WITH THE FINANCIAL POSITION OF AIRPORT TRANSPORT. THE ASSETS OF THE AFFILIATE COMPANIES WOULD HAVE ADDED FINANCIAL STRENGTH. IN THE LIGHT OF THE ABOVE, THERE APPEARS TO BE NO SOUND BASIS FOR QUESTIONING THE CAPACITY OR WILLINGNESS OF YELLOW CAB AND ITS STOCKHOLDERS TO ADEQUATELY FINANCE THE OPERATION OF THE CONCESSION.

2.A. THE PRESIDENT OF ARLINGTON YELLOW CAB HAS AN AGREEMENT WITH AIRPORT TRANSPORT'S PARENT COMPANY PROVIDING THAT HE WILL NOT ENGAGE IN ANY ACTIVITY COMPETITIVE WITH AIRPORT TRANSPORT WITHOUT FIRST FULLY AND OPENLY SUBMITTING THE DETAILS OF THE PROPOSAL TO AIRPORT TRANSPORT AND, FURTHER, THAT HE AGREES TO GIVE HIS BEST EFFORTS TO SECURING A RENEWAL OF AIRPORT TRANSPORT'S CONTRACT WITH THE WASHINGTON NATIONAL AIRPORT. AWARD OF THE CONTRACT TO YELLOW CAB WOULD QUITE LIKELY HAVE RESULTED IN LITIGATION, AND REGARDLESS OF THE OUTCOME, SUCH LITIGATION COULD HAVE AN ADVERSE EFFECT ON THE GROUND TRANSPORTATION SERVICE.

B. REPRESENTATIVES OF YELLOW CAB AT THE MEETING OF JUNE 15, AGREED TO DIVULGE THEIR DEFENSE TO SUCH POSSIBLE LITIGATION IF THE GOVERNMENT CONSIDERED IT NECESSARY IN EVALUATING THEIR BID. YELLOW CAB'S LETTER OF AUGUST 6, FURTHER STATES:

"* * * OVER SIMPLIFIED AND IN ADDITION TO OTHER LEGAL DEFENSES TO THIS ARGUMENT WHICH MR. NICHOLS HAS AS AN INDIVIDUAL, IT MAY BE STATED THAT THE ARLINGTON YELLOW CAB COMPANY OPERATIONS WERE SPECIFICALLY EXEMPTED FROM APPLICATION OF THE AGREEMENT, ALL PARTIES TO THE AGREEMENT REFERRED TO ARE DECEASED EXCEPT MR. NICHOLS, AND FINALLY AND IN ANY EVENT, MR. NICHOLS DOES NOT OWN THE CONTROLLING INTEREST IN THE ARLINGTON YELLOW CAB CO.'

C. THERE IS NO INDICATION THAT C.A.A. REPRESENTATIVES ASKED THAT THE DEFENSE BE DIVULGED NOR DID THEY EXAMINE THE AGREEMENT TO DETERMINE WHETHER YELLOW CAB'S OPERATIONS WERE EXEMPT FROM ITS TERMS. WE ARE OF THE OPINION THAT IN THE INTERESTS OF OBTAINING THE BEST POSSIBLE CONTRACT FOR THE GOVERNMENT A FULLER EXAMINATION SHOULD HAVE BEEN MADE BY LEGAL REPRESENTATIVES OF C.A.A. OR THE DEPARTMENT OF COMMERCE TO ASCERTAIN WHETHER IN FACT AWARD TO YELLOW CAB WOULD HAVE RESULTED IN LITIGATION WHICH MIGHT HAVE DISRUPTED SERVICE.

3.A. YELLOW CAB'S OPERATIONS ARE PRESENTLY NON-UNION IN CHARACTER. WHILE YELLOW CAB REPRESENTATIVES HAVE STATED AN INTENTION TO DEAL WITH THE UNION TO THE EXTENT OF THE AIRPORT SERVICE, IT WOULD SUPPLEMENT THE AIRPORT SERVICE WHEN NECESSARY BY ITS CABS OPERATING IN THE ARLINGTON COUNTY AREA. SINCE THE LATTER CABS ARE DRIVEN BY NON-UNION EMPLOYEES AND THERE IS NO INDICATION THAT THEY WOULD BE UNIONIZED, COMPLICATIONS MIGHT ARISE TO THE DETRIMENT OF THE SERVICE AT THE AIRPORT.

B. THE LETTER OF AUGUST 6, FROM YELLOW CAB STATES IN REGARD TO THIS MATTER IN PERTINENT PART THAT:

"* * * TO ASSUME, AS THE CIVIL AERONAUTICS ADMINISTRATION APPARENTLY DOES, THAT WE WOULD PLACE ALL OF OUR OPERATIONS IN JEOPARDY BY ATTEMPTING TO INTERMINGLE UNIONIZED AND NON-UNION BUSINESS IS TO DENY ONE OF THE FUNDAMENTALS OF PRIVATE BUSINESS. THE CIVIL AERONAUTICS ADMINISTRATION AT NO TIME ASKED US TO INDICATE WHETHER OUR ARLINGTON COUNTY OPERATIONS WOULD BE UNIONIZED. THE FACT IS THAT WE DID PLAN TO UNIONIZE ALL OUR GROUND TRANSPORTATION OPERATIONS HAD WE BEEN AWARDED THE AIRPORT CONCESSION. WOULD HAVE BEEN HAPPY TO SO INDICATE TO THE CIVIL AERONAUTICS ADMINISTRATION. "* * * IN ANY EVENT, WE WERE PREPARED, AND ARE PREPARED, UPON BEING GRANTED THE CONTRACT, TO NEGOTIATE WITH ANY BARGAINING AGENT CHOSEN BY OUR EMPLOYEES.

"ALTHOUGH THE QUESTION OF UNION LABOR WAS NEVER RAISED BY C.A.A. IN THE JUNE 15TH CONFERENCE WHERE OUR BID WAS DISCUSSED, THIS FACTOR SUDDENLY APPEARS AS A FACTOR IN THE REJECTION OF OUR D.' C. THERE IS NO EVIDENCE THAT THE SUBJECT OF LABOR UNION AGREEMENT AND AFFILIATIONS WAS RAISED BY THE AGENCY OR DISCUSSED AT ANY TIME DURING THE NEGOTIATIONS. SINCE NEITHER THE INVITATION NOR THE AGREEMENT ATTACHED THERETO STIPULATED ANY CONDITIONS REGARDING UNION ARRANGEMENTS, WE BELIEVE THAT IT WAS THE DUTY OF THE AGENCY TO INITIATE ANY INQUIRIES BELIEVE THAT AN AGENCY IS JUSTIFIED IN ASSUMING A PASSIVE ROLE ON A MATTER OF THIS KIND AND THEN REJECTING THE BID PARTIALLY BECAUSE THE BIDDER DID NOT VOLUNTARILY FURNISH THE INFORMATION.

4.A. THE USE OF RADIO CONTROLLED CABS OTHERWISE USED IN THE ARLINGTON COUNTY AREA WOULD RESULT IN COMPLAINTS FROM OTHER CAB COMPANIES AS AN APPARENT VIOLATION OF THE EXCLUSIVE RIGHT TO PICK UP PASSENGERS CONTAINED IN ARTICLE I (A) OF THE CONTRACT. FURTHER, THE USE OF SUCH CABS WHICH ALSO ENGAGE IN OTHER BUSINESS NOT UNDER THE CONTRACT WOULD INCREASE THE DIFFICULTY IN DETERMINING THE QUANTITY OF RECEIPTS SUBJECT TO THE CONTRACT.

B. YELLOW CAB'S COMMENTS CONTAINED IN THEIR LETTER OF AUGUST 6, ARE:

"THE BID FORMS SPECIFIED THAT MARKINGS OF ROLLING STOCK WOULD BE SUBJECT TO APPROVAL OF THE AIRPORT DIRECTOR. WE AGREED TO THIS. * * * WE REAFFIRMED IN THAT MEETING (OF JUNE 15) OUR WILLINGNESS TO CONFORM TO THE REGULATIONS. OUR ROLLING STOCK COULD AND WOULD BE MARKED PROBLEM POSED IN THE CIVIL AERONAUTICS ADMINISTRATION REPORT IS IMAGINARY--- NOT POTENTIALLY REAL.

"AS FOR THE ACCOUNTING OF REVENUES, WE REFER YOU TO THE LAST TWO LINES OF PAGE 12 OF THE ATTACHED MINUTES OF THE JUNE 15TH MEETING AND THE DISCUSSION FOLLOWING ON PAGE 13. IT IS ABUNDANTLY CLEAR FROM THIS WHAT OUR INTENTIONS WERE. WE WOULD INCLUDE IN THE GROSS RECEIPTS UNDER THE CONTRACT REVENUES RECEIVED FROM ANY PICK-UP OF PASSENGERS AT THE AIRPORT OF ARLINGTON YELLOW CAB. WE WOULD PROPOSE ON RECOMMENDATIONS OF OUR CPA SIMPLE ACCOUNTING PROCEDURES. THE CIVIL AERONAUTICS ADMINISTRATION COULD APPROVE OUR PROPOSED ACCOUNTING METHODS OR PRESCRIBE ANOTHER TO ITS LIKING.

"TO CONCLUDE, AS THE CIVIL AERONAUTICS ADMINISTRATION DOES, THAT ITS AUDITING JOB WOULD BE MADE DIFFICULT IS PURE SPECULATION. IT NEED NOT BE SO.'

C. YELLOW CAB HAD AGREED TO MARK THE VEHICLES USED AT THE AIRPORT FROM OTHER VEHICLES. FURTHERMORE, THE PROPOSED CONTRACT PROVIDES THAT THE AIRPORT DIRECTOR MAY DISAPPROVE THE USE OF ANY VEHICLE BECAUSE OF COLOR, DESIGN, OR CONDITION. THUS, IT SEEMS THAT THE AGENCY HAD BY BOTH CONTRACT AND SPECIFIC COMMITMENT OF THE BIDDER, THE BASIS FOR INSISTING UPON SUCH DISTINCTIVE MARKINGS AS IT FELT WERE NECESSARY TO OBVIATE POLICING PROBLEMS. AS TO REPORTING RECEIPTS, THE BIDDER HAD LIKEWISE AGREED TO ADOPT ANY SYSTEM OF ACCOUNTING SUGGESTED OR APPROVED BY THE AGENCY. WHILE IT IS POSSIBLE THAT THE AUDITING OF RECEIPTS ON RADIO DISPATCHED TAXICABS MAY HAVE BEEN MORE COMPLICATED THAN UNDER THE PRESENT ARRANGEMENTS, THIS CAN HARDLY BE CONSIDERED AS A REASON FOR REJECTING THE BID. BOTH THE REASONS ADVANCED UNDER THIS SECTION SEEM AT BEST, MINOR CONSIDERATIONS.

5.A. YELLOW CAB'S REPRESENTATIVES GAVE VERBAL ASSURANCE THAT THE HIGH STANDARD OF SERVICE SET UNDER THE PREVIOUS CONTRACT WOULD BE MAINTAINED BUT GAVE NO INDICATION OF THE LOAD FACTOR THE COMPANY WAS CONSIDERING. CONSEQUENTLY, IT WOULD BE POSSIBLE FOR THIS FIRM TO OPERATE AT LESS EXPENSE THAN THE INCUMBENT BY HOLDING THE OUTGOING PASSENGER AT THE RAMP FOR SOME ADDITIONAL TIME AND THUS DETERIORATE THE SERVICE.

B. YELLOW CAB'S COMMENTS ARE:

"AS CONCEDED BY THE CIVIL AERONAUTICS ADMINISTRATION, WE DID GIVE VERBAL ASSURANCE THAT WE WOULD AT LEAST EQUAL THE STANDARD OF SERVICE PROVIDED BY THE PRESENT CONTRACTOR. THE PRESENT CONTRACTOR IS IN A UNIQUE POSITION TO CITE ACTUAL EXPERIENCE ON LOAD FACTORS. IF THE CIVIL AERONAUTICS ADMINISTRATION WANTED US TO AGREE TO A SPECIFIED MAXIMUM WAITING PERIOD, IT SHOULD HAVE SO ADVISED US, PREFERABLY IN THE BID INVITATION, BUT CERTAINLY IN THE JUNE 15TH MEETING.

"TO SUGGEST, AS THE CIVIL AERONAUTICS ADMINISTRATION DID IN ITS REPORT TO YOU, THAT ANY BIDDER WOULD NOT GIVE SERIOUS "CONSIDERATION" TO THIS POINT IS AGAIN LUDICROUS IN THE FACE OF THE HEAVY INVESTMENT AND BOND REQUIRED AS A PART OF THE OPERATION.'

C. TOTAL OPERATING COSTS (EXCLUSIVE OF FEES PAYABLE TO THE GOVERNMENT) ESTIMATED BY YELLOW CAB WERE CONSIDERABLY LESS THAN THE ACTUAL COSTS OF AIRPORT TRANSPORT FOR THE CALENDAR YEAR 1955. AN ANALYSIS OF THE ITEMS COMPRISING THESE TOTALS WOULD HAVE IDENTIFIED THE DIFFERENCES BY TYPES OF COST AND THEREBY ENABLE A MORE CONCLUSIVE JUDGMENT REGARDING THE APPARENT CAPABILITY OF YELLOW CAB TO RENDER SERVICE OF THE QUALITY DESIRED. WERE INFORMED BY AIRPORT OFFICIALS THAT THEY DOUBTED YELLOW CAB COULD MAINTAIN SATISFACTORY SERVICE AT SUCH REDUCED COSTS BUT THAT AN ANALYSIS OF THE INDIVIDUAL ITEMS OF COST WAS NOT MADE.

6.A. WHILE THE INCUMBENT HAS 46 LIMOUSINES AND PLANS TO INCREASE THAT FLEET, YELLOW CAB INDICATED AN INTENTION TO BEGIN OPERATIONS WITH 30 LIMOUSINES, AND TO INCREASE THE NUMBER IF THE AIRPORT DIRECTOR FOUND THAT MORE WERE NEEDED TO PROVIDE THE PROPER STANDARD OF SERVICE AND THE CONTRACTOR AGREED WITH SUCH FINDINGS. THAT QUALIFICATION (THAT THE FIRM WOULD HAVE TO AGREE WITH THE FINDINGS OF THE DIRECTOR) MIGHT RESULT IN A SIGNIFICANT ADMINISTRATIVE BURDEN ON THE DIRECTOR.

B. YELLOW CAB CONTENDS THAT IF A MINIMUM NUMBER OF LIMOUSINES WAS REQUIRED, THE INVITATION SHOULD HAVE SO SPECIFIED, AND FURTHER THAT THE FIRM'S REPRESENTATIVES AT THE MEETING OF JUNE 15, GAVE "CATEGORICAL ASSURANCE THAT WE WOULD INCREASE THE NUMBER OF VEHICLES AS REQUIRED.'

C. IT IS NOT ENTIRELY CLEAR TO US FROM THE EVIDENCE WHETHER YELLOW CAB INTENDED TO USE 30 LIMOUSINES AS ITS APPROXIMATE PERMANENT FLEET OR MERELY AS THE MINIMUM FLEET WITH WHICH TO BEGIN OPERATIONS. ITS BID STATED THAT 30 LIMOUSINES AND 50 TAXICABS WERE TO BE ACQUIRED. IN THE MEETING YELLOW CAB ACKNOWLEDGED THAT THE 30 LIMOUSINES SEEMED A BIT LOW BUT BELIEVED THAT IF IT HAD 30 READY FOR SERVICE BY JULY 1 IT WOULD TAKE CARE OF THE LOAD FACTOR UNTIL IT WAS FOUND THAT MORE WERE NEEDED. IT WAS NOT BROUGHT OUT WHETHER ANY OR ALL OF THE 41 TAXICABS THEN OWNED BY YELLOW CAB WERE CONTEMPLATED FOR USE IN THE INITIAL OPERATION; OTHER DISCUSSION INDICATED THAT THEY WOULD BE AVAILABLE BUT PRINCIPALLY TO HANDLE PEAK REQUIREMENTS. IT IS LOGICAL TO ASSUME THAT AIRPORT TRANSPORT WAS NOT USING MORE VEHICLES THAN WERE NECESSARY FOR THE STANDARD OF SERVICE BEING RENDERED. YELLOW CAB STATED THAT IT WAS AWARE OF THE NUMBER OF VEHICLES CURRENTLY BEING USED BY AIRPORT TRANSPORT. SINCE YELLOW CAB APPARENTLY PLANNED TO COMMENCE OPERATIONS WITH SUBSTANTIALLY FEWER LIMOUSINES THAN THE NUMBER THEN IN USE, WE BELIEVE THAT ITS PROPOSED METHOD OF OPERATION SHOULD HAVE BEEN EXPLORED IN THE COURSE OF NEGOTIATIONS. THE RECORD DOES NOT INDICATE THAT THIS WAS DONE. THERE IS SOME QUESTION AS TO WHETHER IN THE COURSE OF NEGOTIATIONS YELLOW CAB AGREED EQUIVOCALLY OR UNEQUIVOCALLY THAT IT WOULD INCREASE THE NUMBER OF VEHICLES UPON A FINDING BY THE AIRPORT DIRECTOR THAT MORE WERE NEEDED. SUCH A PROVISION WAS NOT INCLUDED IN THE FORM OF AGREEMENT CIRCULATED WITH THE INVITATION FOR PROPOSALS BUT DOES APPEAR AS ARTICLE VI (B) OF THE CONTRACT AWARDED AIR TRANSPORT. IT IS, OF COURSE, A SIGNIFICANT PROVISION IN ASSURING THAT THE CONTRACTOR RENDERS SATISFACTORY SERVICE. YELLOW CAB'S SPECIFIC ACCEPTANCE OR REJECTION OF THIS PROVISION SHOULD HAVE BEEN OBTAINED.

7.A. YELLOW CAB WAS NOT AT THE TIME OF EVALUATION IN A POSITION TO BEGIN FULL SERVICE ON JULY 1. THE FIRM HAD NO POSITIVE SCHEDULE FOR ACQUISITION OF LIMOUSINES IN ITS ORIGINAL PROPOSAL. AS A RESULT OF THE NEGOTIATIONS THE FIRM OBTAINED A PROMISE FROM A LOCAL DEALER THAT HE COULD DELIVER 10 BY JULY 1, BUT THE SCHEDULE ON THE BALANCE OF 20 WOULD NEED TO BE WORKED OUT WITH THE FACTORY.

B. YELLOW CAB STATES:

"WE ASSURED THE CIVIL AERONAUTICS ADMINISTRATION, USING ITS HYPOTHETICAL AWARD DATE OF JUNE 22, THAT WE COULD BEGIN THE SERVICE AT MIDNIGHT ON JUNE 30TH. THIS WOULD HAVE BEEN DONE BY USING TAXICABS AND CHARGING LIMOUSINE RATES UNTIL LIMOUSINES IN THE FULL NUMBERS NEEDED WERE AVAILABLE.

"OUR SCHEDULE OF ACQUISITION OF LIMOUSINES IN OUR ORIGINAL PROPOSAL ASSUMING AN AWARD WITHIN A REASONABLE TIME, WAS TO HAVE 30 SUCH VEHICLES PROMISE FROM ONE DEALER SUBSTANTIALLY AS REPORTED TO YOU BY THE CIVIL AERONAUTICS ADMINISTRATION, AND ASSUMING A HYPOTHETICAL AWARD DATE OF JUNE 22. SOMETHING NOT REPORTED TO YOU BY THE CIVIL AERONAUTICS ADMINISTRATION IS THAT WE ALSO SECURED AND FURNISHED TO IT A LETTER FROM ANOTHER (ONE OF THE LARGEST LIMOUSINE COMPANIES, THE CHECKER CAB SALES CORPORATION) DEALER, A PROMISE TO DELIVER 10 LIMOUSINES BY JUNE 30, 20 ADDITIONAL BY JULY 7, AND 20 ADDITIONAL BY JULY 15, MAKING A TOTAL OF 50 LIMOUSINES AVAILABLE BY JULY 15, 1956, FROM THIS ONE DEALER.'

C. THE PERIOD FROM THE OPENING OF PROPOSALS TO THE EFFECTIVE DATE OF THE PROPOSED CONTRACT WAS INSUFFICIENT TO PERMIT ORDERLY NEGOTIATION WITH BIDDERS, VERIFICATION OF THEIR REPRESENTATIONS AND AWARD OF THE CONCESSION REASONABLY IN ADVANCE OF THE BEGINNING OF SERVICE TO ALLOW A NEW CONTRACTOR TO OBTAIN DELIVERY OF VEHICLES, RECRUIT PERSONNEL, AND IN ON THE CONTRACT DATE. THIS CONDITION CREATES A SITUATION WHEREIN BY THE DATE THE AWARD IS MADE, ONLY THE INCUMBENT IS IN A POSITION TO PROVIDE THE REQUIRED SERVICE AND OTHER FACILITIES ON THE EFFECTIVE DATE OF THE CONTRACT. IN REGARD TO YELLOW CAB'S SCHEDULE FOR THE ACQUISITION OF LIMOUSINES, NO MENTION IS MADE OF THE ARRANGEMENTS WHICH YELLOW CAB HAD WITH CHECKER CAB SALES CORPORATION FOR 50 LIMOUSINES WITH DELIVERY OF 10 BY JUNE 30, 20 BY JULY 7, AND 20 BY JULY 15. THIS ARRANGEMENT WAS WAS FORWARDED TO THE AGENCY ON JUNE 19. IN VIEW OF THE FACT THAT THE DELAY IN MAKING THE AWARD WAS ATTRIBUTABLE ENTIRELY TO CIRCUMSTANCES UNDER THE CONTROL OF THE AGENCY, ITS REJECTION OF THE BID ON THIS GROUND DOES NOT APPEAR TO BE JUSTIFIED, AT LEAST WITHOUT EFFORTS TO VERIFY THE ARRANGEMENTS FOR SECURING EQUIPMENT.

HOUSE REPORT NO. 2507, 76TH CONGRESS, STATES THAT THE PURPOSE OF SECTION 3 OF THE ACT OF JUNE 29, 1940, WAS DESIGNED "TO ENABLE THE ADMINISTRATOR OF THE CIVIL AERONAUTICS AUTHORITY TO LEASE SPACE OR PROPERTY AT THE WASHINGTON NATIONAL AIRPORT AT THE MOST ADVANTAGEOUS TERMS TO THE GOVERNMENT.' IT MAY BE STATED GENERALLY THAT CONTRACTING OFFICERS OF THE FEDERAL GOVERNMENT HAVE THE DUTY TO SELECT THE CONTRACT MOST ADVANTAGEOUS TO THE GOVERNMENT, WHETHER THE AWARD IS MADE PURSUANT TO FORMAL ADVERTISING OR NEGOTIATION, IN TERMS OF PRICE AND OTHER FACTORS SUCH AS JUDGMENT, SKILL, ABILITY, CAPACITY AND INTEGRITY. FRIEND V. LEE, 221 F.2D 96.

IN THIS CASE, NOT ONLY THE FINANCIAL RETURN TO THE GOVERNMENT BUT ALSO THE PROPOSED METHOD OF OPERATION AND THE FITNESS AND ABILITY OF THE PROPONENT TO SERVE THE PUBLIC WERE TO BE EVALUATED. NO STANDARDS OR GUIDELINES FOR THIS EVALUATION WERE SUPPLIED AND NO BASIS OF COMPARISON OF THE FAIRLY MEASURABLE FINANCIAL FACTOR WITH THE SOMEWHAT IMPONDERABLE OTHER FACTORS WAS STATED IN THE PROPOSAL. IT IS DOUBTLESS INEVITABLE THAT THE EXERCISE OF THE ADMINISTRATIVE DISCRETION OF THE CONTRACTING OFFICER, WHICH IS CONCEDED IN THOSE AREAS BY SUCH CASES AS FRIEND V. LEE, SUPRA, AND O-BRIEN V. CARNEY, 6 F.SUPP. 761, SHOULD BE PECULIARLY SUBJECT TO CHARGES OF FAVORITISM, ABUSE, CAPRICE AND ARBITRARINESS UNLESS THE ADMINISTRATIVE DECISION IS SOUNDLY BASED ON FACTUAL BACKGROUND AND LOGICALLY REASONED CONCLUSIONS.

THERE ARE SEVERAL CIRCUMSTANCES WHICH AT LEAST RAISE IMPLICATIONS THAT THE COMPARISON OF YELLOW CAB'S PROPOSAL WITH THAT OF THE INCUMBENT CONTRACTOR LACKED SUCH OBJECTIVENESS AS WOULD ALLAY ANY DOUBTS OF THE REASONABLENESS OF THE ADMINISTRATIVE DECISION ULTIMATELY REACHED.

THESE ARE:

1. THE ARRANGEMENT OF THE TIME SCHEDULE FROM DISTRIBUTION OF THE INVITATION TO NOTICE OF AWARD WAS SUCH THAT AT THE TIME OF AWARD ONLY THE INCUMBENT WAS IN A POSITION TO BEGIN FULL SERVICE ON JULY 1. THERE WAS NO EMERGENCY AND SOUND REASON WOULD APPEAR TO HAVE DICTATED THAT THE NEW CONTRACT BE AWARDED A SUFFICIENT TIME BEFORE THE EXPIRATION OF THE OLD ONE TO GIVE THE NEW CONTRACTOR AN OPPORTUNITY TO ACQUIRE THE NECESSARY EQUIPMENT, PERSONNEL AND FACILITIES.

2. THE AIRPORT DIRECTOR ON JUNE 6 RECOMMENDED THAT THE INCUMBENT'S BID BE ACCEPTED. THIS WAS NINE DAYS BEFORE ANY NEGOTIATIONS WERE BEGUN. SINCE THE PROPOSALS MADE BY THE BIDDERS WERE INTENDED AS A BASIS FOR NEGOTIATION AND SINCE THE INCUMBENT'S PROPOSAL WAS AMENDED DURING NEGOTIATIONS, THE BEST INTEREST OF THE GOVERNMENT WOULD SEEM TO HAVE REQUIRED THAT NEGOTIATIONS BE COMPLETED BEFORE ANY RECOMMENDATION WAS MADE. THAT A SOUND RECOMMENDATION COULD BE MADE BEFORE ALL OF THE PROPOSALS HAD BEEN EXPLORED SUFFICIENTLY TO DETERMINE WHICH OFFEROR PROPOSED TERMS MOST ADVANTAGEOUS TO THE GOVERNMENT IS QUESTIONABLE. 3. THE SECOND REASON GIVEN FOR MAKING THE AWARD TO AIRPORT TRANSPORT WAS THAT IT OFFERED A HIGHER MINIMUM ANNUAL GUARANTEE OF $175,000. THE PROPOSAL FORM STIPULATED A GUARANTEE OF $125,000 AND DID NOT INDICATE THAT A HIGHER GUARANTEE MIGHT BE OFFERED. FURTHER, WHILE THE INCUMBENT'S GUARANTEE WAS RAISED DURING THE COURSE OF NEGOTIATIONS, NO SUCH OPPORTUNITY WAS AFFORDED YELLOW CAB. FINALLY, ON THE BASIS OF PAST EXPERIENCE AS TO BUSINESS VOLUME, THE HIGHER RATES OFFERED BY YELLOW CAB WOULD HAVE BEEN MORE ADVANTAGEOUS TO THE GOVERNMENT THAN THE INCREASED GUARANTEE OFFERED BY AIRPORT TRANSPORT.

4. OF THE OTHER REASONS GIVEN FOR THE REJECTION OF YELLOW CAB'S BID, NOS. 1 (YELLOW CAB'S NET WORTH) AND 4 (MARKING OF CABS AND ACCOUNTING DIFFICULTIES) ARE FOR THE REASONS STATED ABOVE NOT DEEMED TO BE AN ADEQUATE BASIS FOR THE REJECTION OF THE PROPOSAL. ON REASONS NOS. 2 (AGREEMENT NOT TO COMPETE), 3 (POSSIBLE DIFFICULTY WITH THE LABOR UNION), 5 (STANDARD OF SERVICE) AND 6 (INCREASES IN NUMBER OF VEHICLES) THE ANALYSIS PERFORMED BY THE AGENCY, AS INDICATED ABOVE, WAS NOT ADEQUATE TO DETERMINE WHETHER OR NOT IN FACT THEY WOULD HAVE TENDED TO REDUCE THE DESIRED STANDARD OF SERVICE. FURTHER, ON REASON NO. 7, THE STATEMENT OF LIMOUSINE AVAILABILITY FROM A SECOND SOURCE, AFFIRMED BY A LETTER FROM THE SOURCE, SEEMS TO HAVE BEEN IGNORED BY THE AGENCY IN EVALUATING THE PROPOSALS.

WE EXPRESS NO OPINION WHETHER THE AWARD TO AIR TRANSPORT WILL ULTIMATELY PROVE TO BE IN THE BEST INTERESTS OF THE GOVERNMENT BECAUSE, IN OUR OPINION, THE NEGOTIATIONS WERE NOT CONDUCTED IN SUCH A MANNER AS TO ASSURE TO THE GOVERNMENT ALL AVAILABLE INFORMATION BEFORE SELECTING THE MOST ADVANTAGEOUS CONTRACT, CONSIDERING PRICE AND OTHER FACTORS MENTIONED IN THE PROPOSAL. WHILE WE WOULD NOT BE WARRANTED IN DIRECTING CANCELLATION OF THE CONTRACT, IN VIEW OF THE NEGOTIATING AUTHORITY GIVEN THE ADMINISTRATOR BY THE ACT OF JUNE 29, 1940, WE DO FEEL THAT YOU WILL WISH TO REVIEW THE NEGOTIATION OF THIS CONTRACT. BECAUSE OF THE CIRCUMSTANCES SURROUNDING THE AWARD, WE ARE BRINGING THE MATTER TO THE ATTENTION OF THE PROPER CONGRESSIONAL COMMITTEES.