B-141721, MAY 9, 1960

B-141721, MAY 9, 1960

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO THE REPORT DATED FEBRUARY 15, 1960, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING THE PROTEST OF THE PACIFIC CAR AND FOUNDRY COMPANY, RENTON, WASHINGTON, AGAINST THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. 600-784-60 ISSUED BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., ON OCTOBER 22, 1959.

THE INVITATION, AS AMENDED, REQUESTED BIDS FOR FURNISHING ON AN ORIGIN BASIS 96 UNITS OF ITEM 1 DESCRIBED AS FOLLOWS:

"CRANE, (ATTACHMENT FOR MOUNTING ON FORK LIFT TRUCK) 5500 POUND CAPACITY AT 12 1/2 FOOT RADIUS, HYDRAULIC POWERED, 180 DEGREE SLUE.'

ITEM 2 COVERED A PROVISIONING LIST AND SUPPORTING DOCUMENTATION FOR ITEM 1.

BIDDERS WERE REQUESTED TO FURNISH THE APPROXIMATE SHIPPING WEIGHT PER SHIPPING CONTAINER, IF APPLICABLE, OTHERWISE PER UNIT, AND WERE ADVISED THAT FOR THE SOLE PURPOSE OF EVALUATING BIDS THE FINAL DESTINATIONS OF THE SUPPLIES WOULD BE CONSIDERED AS FOLLOWS:

TABLE

1. FORT DIX, NEW JERSEY 36 EACH

2. CHICAGO, ILLINOIS 34 DO.

3. FORTH WORTH, TEXAS 11 DO.

4. SAN FRANCISCO, CALIF. 15 DO.

THE INVITATION FURTHER PROVIDED THAT THE SUPPLIES SHALL BE DELIVERED AT THE DESTINATIONS TO BE SPECIFIED AT A LATER DATE IN THE QUANTITIES AND AT THE TIMES SET FORTH BELOW:

TABLE

QUANTITY DELIVERY REQUIRED

10 EACH SEPTEMBER 1960

20 EACH PER MONTH OCTOBER 1960 THROUGH JAN. 1961

6 EACH FEBRUARY 1961

BIDS WERE OPENED AND TABULATED ON DECEMBER 3, 1959, AND THE 11 BIDS RECEIVED RANGED FROM $3,726.93 TO $5,950 EACH ON ITEM 1, AND FROM "NO CHARGE" TO $4,509.09 ON ITEM 2. THE TWO LOWEST BIDS WERE ABSTRACTED AS SET OUT BELOW:

TABLE

ITEMS 1 UNIT

AND 2 EST. FRT. TOTAL WEIGHT PACIFIC CAR AND

FOUNDRY CO. $362,294.37 $25,886.11 $388,180.48 3700 LB. GAR WOOD

INDUSTRIES 375,648.00 12,065.38 387,713.38 3550 LB.

GAR WOOD INDUSTRIES, WAYNE, MICHIGAN, WAS DETERMINED TO BE THE LOWEST AGGREGATE BIDDER ON THE BASIS ABSTRACTED ABOVE.

IN EVALUATING THESE TWO BIDS, TRANSPORTATION COSTS WERE FIRST COMPUTED ON A LESS-THAN-CARLOAD BASIS UNDER THE FREIGHT CLASSIFICATION "PARTS, MACHINERY OR TRACTOR NOIBN," AS DESCRIBED IN ITEM 64100 OF UNIFORM FREIGHT CLASSIFICATION NO. 5. FOLLOWING A CONFERENCE ON DECEMBER 30, 1959, WITH REPRESENTATIVES OF PACIFIC, THE NAVY PURCHASING OFFICE DIRECTED ITS OFFICE TRAFFIC ANALYST TO RECOMPUTE FREIGHT COSTS ON THE BASES OF (1) FREIGHT CLASSIFICATION INITIALLY USED, (2) THE PRORATED MONTHLY DELIVERIES TO THE VARIOUS EVALUATION DESTINATION POINTS, AND (3) THE CARLOAD RATES WHERE FEASIBLE TO REFLECT MONTHLY DELIVERIES TO EACH OF THE VARIOUS EVALUATION DESTINATION POINTS. THE PRORATED MONTHLY SCHEDULE WAS AS FOLLOWS:

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SEPT. OCT. NOV. DEC. JAN. FEB. TOTAL FORT DIX, N.J. 4 8

7 8 7 2 36 CHICAGO, ILL. 3 7 8 7 8 1 34 FORT WORTH, TEXAS 1 2 2 2 2 2 11 SAN FRANCISCO, CALIF. 2 3 3 3 3 1 15

TOTAL 10 20 20 20 20 6 96

THE TRAFFIC ANALYST ALSO WAS DIRECTED TO USE A UNIT SHIPPING WEIGHT OF APPROXIMATELY 3,700 POUNDS AND DIMENSIONS OF 14 FEET LONG, 5 FEET, 8 INCHES WIDE, AND 8 FEET, 4 INCHES HIGH, AS SET FORTH IN PACIFIC'S BID. BASED ON THIS WEIGHT AND DIMENSIONS, IT WAS ESTIMATED THAT FOUR UNITS COULD BE LOADED ON A STANDARD 40 FOOT, 7 INCH, OPEN CAR AT THE FOLLOWING RATES FROM RENTON, WASHINGTON, TO THE FOLLOWING EVALUATION DESTINATION POINTS.

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DESTINATION LCL CL CHARGES FORT DIX, NEW JERSEY 966 511 $11,443.96 CHICAGO, ILLINOIS 805 426 9,112.80 FORT WORTH, TEXAS 805

NOT USED 3,276.35 SAN FRANCISCO, CALIF. 354 NOT USED 1,964.70

TOTAL $25,797.81

(RATES IN CENTS PER 100 POUNDS)

ON THE SAME BASES, THE FOLLOWING RATES WERE COMPUTED FROM WAYNE, MICHIGAN.

TABLE

DESTINATION LCL CL CHARGES FORT DIX, NEW JERSEY 321 170 $3,653.70 (*) CHICAGO, ILLINOIS 205 108 2,289.00 FORT WORTH, TEXAS 444 NOT USED 1,733.82 SAN FRANCISCO, CALIF. NOT USED 4,494.30

TOTAL $12,170.82 (**)

(RATES IN CENTS PER 100 POUNDS)

* COMPUTED ON DELIVERY OF ONE CRANE, FOR THE MONTH OF FEBRUARY, WHEREAS, SCHEDULE SHOWS 2 CRANES. CORRECT FREIGHT TO FORT DIX SHOULD BE $3,767.66.

** CORRECT TOTAL SHOULD BE $12,284.78.

AFTER RECOMPUTATION ON THE ABOVE BASES, IT WAS DETERMINED THAT GAR WOOD WAS THE LOW BIDDER--- CONSIDERING THE ESTIMATED CONSTRUCTIVE FREIGHT CHARGES AS $12,284.78--- BY THE TOTAL AMOUNT OF $159.30. ACCORDINGLY, CONTRACT NO. N600/MIS/54330 WAS AWARDED TO GAR WOOD ON JANUARY 11, 1960, IN THE TOTAL AMOUNT OF $375,648.

PACIFIC CONTENDS, IN EFFECT, THAT THE FREIGHT COSTS ESTIMATED UNDER THE INVITATION WERE INCORRECT BECAUSE OF THE RATES AND METHOD OF CARLOADING USED BY THE NAVY PURCHASING OFFICE, AND THAT, AS A RESULT THEY WERE IMPROPERLY DETERMINED TO BE NOT THE LOWEST BIDDER EVEN THOUGH THEIR BID PRICE FOR ITEMS 1 AND 2 WAS $13,353.63 LESS THAN THAT BID BY GAR WOOD.

WE DO NOT AGREE THAT THE FREIGHT RATE USED BY THE NAVY PURCHASING OFFICE IN ESTIMATING THE TRANSPORTATION COSTS UNDER THE INVITATION WAS IN ACCORDANCE WITH THE APPLICABLE TARIFFS. THAT OFFICE USED RATES APPLYING ON MACHINE OR MACHINERY PARTS, IRON OR STEEL. HOWEVER, WE BELIEVE THAT ITEM 1 UNDER THE INVITATION PROPERLY SHOULD BE CLASSIFIED AS "CRANES, NOIBN AND/OR NOS" AS DESCRIBED IN ITEM 60680-A, SUPPLEMENT NO. 4, UNIFORM FREIGHT CLASSIFICATION NO. 5. SEE, ALSO, THE ARMED FORCES SUPPLY SUPPORT CENTER CATALOGING HANDBOOK--- H 6-1, PART 1 SUPPLEMENT JANUARY 1960; OAKLAND TRUCK SALES CO. V. BALTIMORE AND OHIO R.R. CO., 270 I.C.C. 548; AND AUG. PLANTS, INC. V. LONG ISLAND R.R., 281 I.C.C. 172. HENCE, ON THE BASIS OF THAT FREIGHT CLASSIFICATION, WE HAVE RECOMPUTED THE ESTIMATED FREIGHT CHARGES, USING CLASS 85 RATES (LESS-THAN-CARLOAD), OR CLASS 45 RATES (CARLOAD), AND AGGREGATE OF INTERMEDIATES (CLASS AND COMMODITY RATES), WHERE APPLICABLE, FROM RENTON, WASHINGTON, TO THE VARIOUS EVALUATION DESTINATION POINTS.

TABLE

DESTINATION LCL CL CHARGES FORT DIX, NEW JERSEY 962 511 $11,432.32 CHICAGO, ILLINOIS 778 426 9,013.00 FORT WORTH, TEXAS 694 NOT USED2,824.58 SAN FRANCISCO, CALIF. 354 NOT USED 1,964.70

TOTAL $25,234.60

(RATES IN CENTS PER 100 POUNDS)

WE HAVE ALSO RECOMPUTED THE ESTIMATED FREIGHT COSTS APPLICABLE TO THE BID OF GAR WOOD UNDER THE SAME BASIS AND HAVE ARRIVED AT A TOTAL ESTIMATED FREIGHT CHARGE OF $12,108.01 IF SHIPMENTS WERE MADE FROM WAYNE, MICHIGAN, TO THE VARIOUS EVALUATION DESTINATION POINTS.

CONCERNING OUR RENTON, WASHINGTON, RECOMPUTATION, IT IS TO BE NOTED THAT TRANSCONTINENTAL FREIGHT BUREAU TARIFF NO. 1015, I.C.C. NO. 1579, NAMES THE RATES OF 966 AND 805 CENTS PER 100 POINTS FROM RENTON, WASHINGTON, TO FORT DIX, CHICAGO, AND FORTH WORTH. WHILE THESE RATES WERE USED BY THE NAVY PURCHASING OFFICE IN RECOMPUTING THE ESTIMATED FREIGHT CHARGES, ITEM 50 OF THAT TARIFF PROVIDES THAT IF AN AGGREGATE OF INTERMEDIATE RATES PRODUCE LOWER CHARGES, THEY WILL BE USED AND THE RATES IN TARIFF NO. 1015 WILL NOT BE APPLIED. IN COMPUTING THE LESS THAN-CARLOAD RATE TO FORT DIX, AN AGGREGATE OF INTERMEDIATES APPLY FROM RENTON, WASHINGTON, TO LA JUNTA, COLORADO (369 CENTS), AND 593 CENTS BEYOND TO FORT DIX, MAKING A TOTAL OF 962 RATHER THAN 966 CENTS PER 100 POUNDS. THE CARLOAD RATE OF 511 CENTS PER 100 POUNDS AS USED BY THE NAVY PURCHASING OFFICE FOR SHIPMENT TO FORT DIX WAS PROPER. THE 778 CENT RATE PER 100 POUNDS FROM RENTON TO CHICAGO WAS COMPUTED ON AN AGGREGATE OF INTERMEDIATES FROM RENTON TO CHEYENNE, WYOMING (369 CENTS), AND 409 CENTS BEYOND TO CHICAGO, MAKING A TOTAL OF 778 CENTS PER 100 POUNDS RATHER THAN 805 CENTS AS USED BY THE NAVY PURCHASING OFFICE. THE CARLOAD RATE OF 426 CENTS PER 100 POUNDS AS USED TO CHICAGO WAS PROPER. OUR 694 CENT RATE FROM RENTON TO FORT WORTH WAS MADE ON AN AGGREGATE OF INTERMEDIATES TO PUEBLO, COLORADO, OF 36O CENTS AND 325 CENTS BEYOND TO FORTH WORTH, MAKING A TOTAL OF 694 CENTS PER 100 POUNDS RATHER THAN 805 CENTS AS USED IN THE ADMINISTRATION COMPUTATION. THE 369 CENT RATE TO LA JUNTA, CHEYENNE, AND PUEBLO, RESPECTIVELY, IS NAMED IN ITEM 1870 OF TRANSCONTINENTAL FREIGHT BUREAU TARIFF NO. 2-Y, I.C.C. NO. 1612. THE RATES BEYOND ARE CLASS 85 RATES. OUR COMPUTATIONS ON THE FORT DIX AND CHICAGO CARLOAD RATES AGREE WITH THE ADMINISTRATIVE COMPUTATION. WE ALSO AGREE WITH THE COMPUTATION OF THE RATE AND CHARGES FROM RENTON TO SAN FRANCISCO. IT SHOULD BE NOTED THAT THE ABOVE RATES APPLY IRRESPECTIVE OF WHETHER ITEM 1 OF THE INVITATION IS SHIPPED UNDER A BILL OF LADING DESCRIPTION OF A CRANE, MACHINERY, OR MACHINE PARTS. THE BASIS OF OUR RECOMPUTATION THE APPLICABLE FREIGHT RATES, IT NOW APPEARS THAT PACIFIC'S BID OF $362,294.37 ON ITEMS 1 AND 2, WHEN INCREASED BY ITS APPLICABLE ESTIMATED FREIGHT CHARGES OF $25,234.60, IS LOWER THAN GAR WOOD'S BID OF $375,648 AS INCREASED BY ITS APPLICABLE ESTIMATED FREIGHT CHARGES OF $12,108.01 BY $227.04.

THERE IS NO QUESTION THAT IF THE GOVERNMENT WERE TO ACTUALLY SHIP THE CRANES TO THE NAMED DESTINATION POINTS UNDER THE TARIFF RATES DETERMINED BY THE ADMINISTRATIVE OFFICE IN THE EVALUATION OF BIDS, THE TRANSPORTATION COSTS THUS INCURRED WOULD CONSTITUTE OVERPAYMENTS BY THE GOVERNMENT BECAUSE THEY WERE IN EXCESS OF THE LOWEST FREIGHT RATES LEGALLY AVAILABLE TO THE GOVERNMENT ON SUCH SHIPMENTS. THAT BEING THE CASE, THE EVALUATION OF BIDS TO DETERMINE THE LOWEST ESTIMATED TRANSPORTATION COSTS TO THE GOVERNMENT MUST BE MADE ON THE BASIS OF THE LOWEST FREIGHT RATES AVAILABLE TO THE GOVERNMENT BETWEEN THE BIDDERS' ORIGIN POINTS AND THE DESTINATION POINTS NAMED IN THE INVITATION. WE ARE OF THE VIEW THAT SUCH EVALUATION OF ESTIMATED FREIGHT CHARGES IS REQUIRED BY THE PROVISIONS OF 10 U.S.C. 2305 (B) THAT AWARDS SHALL BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID "WILL BE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED.' IN DECISION B-108531 DATED APRIL 8, 1952, THE FOLLOWING PERTINENT STATEMENT WAS MADE:

"ALSO, THERE SHOULD BE CONSIDERED THE FACT THAT IF THERE BE USED IN THE EVALUATION A RATE WHICH IT MAY ULTIMATELY BE FOUND CANNOT BE OBTAINED ON A SHIPMENT, THE RESULT MAY BE THAT THE WRONG CONTRACTOR WOULD GET THE BUSINESS AND THAT THE DELIVERED COST TO THE GOVERNMENT WOULD BE GREATER THAN IF THE AWARD HAD BEEN MADE TO ANOTHER BIDDER. CONSEQUENTLY, THE MERE FACT THAT THIS OFFICE, IN AUDITING THE ACCOUNTS OF A DISBURSING OFFICER OR A CARRIER, MAY HAVE TENTATIVELY APPLIED A CERTAIN RATE OR CLASSIFICATION IS NOT ALONE SUFFICIENT TO WARRANT OR JUSTIFY THE USE OF THAT RATE OR CLASSIFICATION IN THE EVALUATION OF BIDS. ON THE CONTRARY, IT WOULD SEEM THAT THE INTERESTS OF THE GOVERNMENT AS WELL AS THE INTERESTS OF COMPETING BIDDERS WOULD REQUIRE THAT THERE BE USED IN THE EVALUATING OF BIDS ONLY THE LOWEST RATES WHICH THERE IS SOUND REASON FOR BELIEVING WILL BE OBTAINABLE BY THE GOVERNMENT IN MAKING THE PARTICULAR SHIPMENT INVOLVED.

"WHILE THE FUNCTION OF MAKING AWARDS UPON BIDS IS PRIMARILY AN ADMINISTRATIVE RESPONSIBILITY, IT DOES NOT APPEAR THAT IN DETERMINING THE COMPARATIVE DELIVERED COSTS UNDER THE RESPECTIVE BIDS THE ADMINISTRATIVE OFFICERS ARE REQUIRED TO DO MORE THAN EXERCISE THE BEST JUDGMENT OF WHICH THEY ARE CAPABLE IN DETERMINING THE RATINGS APPLICABLE IN SUCH INDEFINITE RATING SITUATIONS AS EXIST IN THE PRESENT MATTER. * * *"

SEE, ALSO, IN THIS CONNECTION 35 COMP. GEN. 603.

SINCE WE ARE ADVISED THAT GAR WOOD HAS EITHER EXPENDED OR COMMITTED, IN RELIANCE UPON THE CONTRACT AWARD, VERY SUBSTANTIAL SUMS IN FURTHERANCE OF THE CONTRACT WORK, WE HAVE CONCLUDED THAT IT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT TO QUESTION THE AWARD MADE IN THIS INSTANCE. HOWEVER, WE THINK IT NECESSARY TO POINT OUT THAT ORDINARILY AN AWARD MADE TO OTHER THAN A LOW QUALIFIED BIDDER IS A NULLITY. AS STATED IN 37 COMP. GEN. 330, 331:

"WE HAVE HELD THAT THE QUOTED PROVISION REQUIRES THAT AWARD, IF ANY, BE MADE TO THE LOW BIDDER WITH CERTAIN EXCEPTIONS NOT APPLICABLE HERE. COMP. GEN. 662, 664. AWARD OF A CONTRACT BY A GOVERNMENT AGENCY CONTRARY TO THE PROVISIONS OF STATUTE IS A NULLITY AND CONFERS NO RIGHTS ON THE CONTRACTOR AGAINST THE UNITED STATES. UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88, 92; CLARK V. UNITED STATES, 95 U.S. 539; G. G. LOEHLER V. UNITED STATES, 90 C.CLS. 158; 36 COMP. GEN. 94; 34 COMP. GEN. 115; B-120632, SEPTEMBER 10, 1954; B-29602, OCTOBER 23, 1942. IN THE LAST DECISION CITED,WE STATED IN RELATION TO A STATUTORY PROVISION WHICH, LIKE THAT IN QUESTION, HAS BEEN CONSTRUED TO REQUIRE AWARD TO THE LOW BIDDER, THAT: "THE QUESTION AS TO WHETHER THE UNITED STATES SHOULD CANCEL A CONTRACT WHICH WAS AWARDED ERRONEOUSLY BECAUSE OF A MISTAKE OF FACT ORDINARILY ARISES UNDER CIRCUMSTANCES WHEREIN AWARD IS REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER AFTER ADVERTISING, PURSUANT TO THE PROVISIONS OF SECTION 3709, REVISED STATUTES, AND IT SUBSEQUENTLY IS DETERMINED THAT THE BID OF THE SUCCESSFUL CONTRACTOR WAS NOT THE LOWEST RESPONSIBLE BID RECEIVED. SINCE, IN SUCH A CASE, THERE HAS BEEN A FAILURE TO COMPLY WITH SECTION 3709, REVISED STATUTES, WHICH STATUTE HAS BEEN CONSTRUED BY THE COURTS TO BE MANDATORY IN NATURE, ADMINISTRATIVE OFFICERS USUALLY ARE REQUIRED TO CANCEL THE CONTRACT, PARTICULARLY IF SUCH MAY BE DONE WITHOUT JEOPARDIZING THE INTEREST OF THE UNITED STATES. SEE 17 COMP. GEN. 312 AND CASES CITED THEREIN.'

"THE FOREGOING APPLIES TO AWARDS MADE DUE TO ERRORS OF EXISTING FACT WHERE THE CONTRACTING AGENCY MAY BE CHARGED WITH KNOWLEDGE OF THE TRUE STATE OF THE FACTS; IT DOES NOT APPLY TO AWARDS BASED UPON THE REASONABLE EXERCISE OF HONEST JUDGMENT, SUCH AS THE PROPER CLASSIFICATION FOR FREIGHT RATE PURPOSES OF A COMMODITY TO BE TRANSPORTED, EVEN THOUGH A LATER DETERMINATION OF A COURT OR OTHER AUTHORITATIVE TRIBUNAL WOULD REQUIRE A DIFFERENT CONCLUSION. SEE B 127917, JULY 17, 1956.'

IN ARRIVING AT OUR CONCLUSION NOT TO QUESTION THE AWARD MADE TO GAR WOOD INDUSTRIES, WE ARE MINDFUL OF THE FACT THAT THE PROCUREMENT ACTIVITY RELIED UPON A MILITARY TRAFFIC AGENCY TO COMPUTE THE ESTIMATED FREIGHT RATES; THAT THESE RATES WERE RECOMPUTED AT THE REQUEST OF PACIFIC; AND THAT GOOD FAITH AND HONEST JUDGMENT WERE EXERCISED IS THE EVALUATION OF BIDS.

WE SUGGEST, HOWEVER, THAT GREAT CARE BE EXERCISED IN ESTIMATING FREIGHT COSTS FOR BID EVALUATION PURPOSES UNDER INVITATIONS REQUESTING BIDS ON AN ORIGIN BASIS.