B-144107, DEC. 16, 1960

B-144107, DEC. 16, 1960

TO THE H. E. KOONTZ CREAMERY, INC:

YOUR LETTER OF SEPTEMBER 27, 1960, TO THE CONTRACTING OFFICER, PROCUREMENT OFFICE, ABERDEEN PROVING GROUND, MARYLAND, PROTESTS THE ACTION OF THE CONTRACTING OFFICER IN FAILING TO AWARD A CONTRACT TO YOUR COMPANY FOR ITEM 1 OF INVITATION FOR BIDS NO. ORD-18-001-61-32, DATED AUGUST 24, 1960, AND FURTHER PROTESTS HIS READVERTISING FOR THE SAME ITEM IN A SUBSEQUENT INVITATION.

BIDS FOR AN ESTIMATED REQUIREMENT OF 65,000 GALLONS OF MILK WERE REQUESTED UNDER ITEM 1 OF THE INVITATION WHICH CALLED FOR TYPE III, NO. 1 MILK OR, IN THE ALTERNATIVE, UNDER ITEM 1A WHICH CALLED FOR TYPE III, NO. 2 MILK. WE ARE ADVISED BY REPORTS FROM THE CONTRACTING OFFICER AND FROM THE OFFICE OF THE CHIEF OF ORDNANCE THAT YOUR BID OF 81 CENTS PER GALLON WAS THE ONLY BID RECEIVED FOR ITEM 1. TWO BIDS WERE RECEIVED FOR ITEM 1A, 99 CENTS PER GALLON FROM GREEN SPRING DAIRY, INC., BALTIMORE, MARYLAND, AND 86 CENTS PER GALLON FROM SEALTEST FOODS, EASTERN DIVISION, BALTIMORE.

THE SECOND PARAGRAPH ON PAGE 8 OF THE INVITATION STATES THAT "AWARDS WILL BE MADE ONLY TO APPROVED SOURCES.' ON PAGE 9 OF YOUR BID YOU STATED THAT ITEM 1 WOULD BE FURNISHED FROM YOUR BALTIMORE FACILITY.

AN EMPLOYEE OF THE ABERDEEN PROVING GROUND PROCUREMENT OFFICE CALLED MR. JAMES MORRIS OF YOUR COMPANY ON SEPTEMBER 15, 1960, TO DETERMINE IF YOU WERE APPROVED TO SUPPLY TYPE III, NO. 1 MILK. YOU WERE UNABLE TO FURNISH THAT INFORMATION, BUT THE SECOND ARMY VETERINARIAN ADVISED THAT YOUR COMPANY WAS NOT AN APPROVED SOURCE OF NO. 1 MILK, AND YOU WERE ADVISED BY TELEPHONE ON SEPTEMBER 16, 1960, THAT ALL BIDS FOR THE REQUIREMENT COVERED BY ITEM 1 OR 1A WOULD BE REJECTED AND THE ESTIMATED REQUIREMENT OF 65,000 GALLONS WOULD BE READVERTISED.

THE CONTRACTING OFFICER REJECTED YOUR BID ON ITEM 1 SINCE YOUR BALTIMORE FACILITY WAS NOT AN APPROVED SOURCE FOR TYPE III, NO. 1 MILK, AND HE REJECTED THE TWO BIDS FOR ITEM 1A WHEN HE DETERMINED THAT THOSE BIDS OF 86 AND 99 CENTS PER GALLON WERE NOT REASONABLE IN VIEW OF THE CONTRACT PRICE OF 76 CENTS PER GALLON THEN IN EFFECT.

THE ESTIMATED REQUIREMENT OF 65,000 GALLONS OF MILK WAS READVERTISED UNDER INVITATION FOR BIDS NO. ORD-18-001-61-44, DATED SEPTEMBER 16, 1960. BIDS WERE INVITED FOR TYPE III, NO. 2 MILK ONLY, INASMUCH AS THE CONTRACTING OFFICER HAD DETERMINED THAT NONE OF THE BIDDERS ON HIS CURRENT MAILING LIST HAD BEEN APPROVED AS SOURCES OF TYPE III, NO. 1 MILK. THE BIDS RECEIVED IN RESPONSE TO THAT INVITATION WERE OPENED ON SEPTEMBER 26, 1960, AND YOUR BID OF 81 CENTS PER GALLON WAS RECORDED. BIDS OF 78 AND 86 CENTS PER GALLON WERE RECORDED FROM THE GREEN SPRING DAIRY AND SEALTEST. GREEN SPRING RECEIVED THE AWARD AS LOW BIDDER AT 78 CENTS PER GALLON.

YOUR LETTER OF SEPTEMBER 27, 1960, TO THE CONTRACTING OFFICER, PROTESTING YOUR FAILURE TO RECEIVE AN AWARD UNDER THE ORIGINAL INVITATION AND PROTESTING HIS ACTION IN READVERTISING THE REQUIREMENT, ARRIVED AT THE PROCUREMENT OFFICE, ABERDEEN PROVING GROUND, AT 3:15 P.M. ON SEPTEMBER 27, 1960. IN THAT LETER, FOR THE FIRST TIME, YOU ALLEGED THAT YOU INTENDED TO BID FOR TYPE III, NO. 2 MILK BUT DUE TO A CLERICAL ERROR, YOUR BID WAS ENTERED UNDER THE ITEM CALLING FOR TYPE III, NO. 1 MILK. YOUR LETTER MADE THE FOLLOWING ASSERTIONS:

"A. THAT THE FAILURE TO INSERT THE INTENDED QUOTATION UNDER ITEM NO. 1A WAS A "MINOR DISCREPANCY" AND AS SUCH SHOULD HAVE BEEN REGARDED AS A VALID AND RESPONSIVE BID ON ITEM NO. I.

"B.THAT EVEN IF THE CONTRACTING OFFICER SHOULD HOLD THAT SUCH A DISCREPANCY WAS "NOT MINOR" THAT IN FACT UNDER FEDERAL SPECIFICATIONS CM 381E ISSUED MARCH 3, 1949, AMENDED AUGUST 22, 1950, THAT NO. I MILK DOES MEET ALL THE REQUIREMENTS OF AND EXCEEDS THE REQUIREMENTS OF NO. II MILK AND THAT MILK THAT MEETS NO. I MILK REQUIREMENTS AUTOMATICALLY MEETS NO. II REQUIREMENTS, SO SUBSTANTIALLY A BID ON NO. I MILK SATISFIES AND EXCEEDS THE REQUIREMENTS FOR NO. II MILK.

"C. THAT IF THIS COMPANIES BID ON ITEM I AND OTHER COMPANIES BIDS ON ITEM NO. IA WERE REJECTED ON ANY OTHER GROUNDS, OTHER THAN THE FAILURE OF ALL BIDDERS TO BID ON THE SAME ITEM, THIS COMPANY WAS SERVED NO NOTIFICATION NEITHER FORMAL NOR INFORMAL.

"D. THAT IF THE STRICT LETTER OF THE ORIGINAL IFB IS REQUIRED OF THIS ORGANIZATION IE: TO SUPPLY NO. I MILK ON THIS CONTRACT, IT STANDS READY TO SUB-CONTRACT THAT ITEM TO A MILITARY APPROVED SUPPLIER OF NO. I MILK.

"E. THAT FORMAL PROTEST WAS NOT LODGED PRIOR TO THE OPENING OF REPLACEMENT IFB BECAUSE THIS COMPANY RELIED ON THE FACT THAT NO. I MILK IS SIMULTANEOUSLY NO. II MILK AND THAT AS SUCH NO PROTEST NEED BE ENTERED. UPON RECEIPT OF NEW IFB AND DISCOVERING THE CONTRACTING OFFICER HAD NOT SO DETERMINED THERE WAS NOT SUFFICIENT TIME TO ENTER PROTEST PRIOR TO OPENING OF THE REPLACEMENT IFB.'

ON SEPTEMBER 29, 1960, THE CONTRACTING OFFICER REPLIED TO YOUR LETTER AND ADVISED AS FOLLOWS:

"INASMUCH AS (1) YOU BID ON TYPE III, NO. 1 MILK, (2) THE FACILITY WHICH YOU INDICATED IN YOUR BID THAT YOU WOULD SUPPLY TYPE III, NO. I MILK FROM IS NOT AN APPROVED SOURCE AND (3) THE INVITATION CLEARLY STATES THAT AWARDS WILL BE MADE ONLY TO APPROVED SOURCES, IT FOLLOWS THAT REJECTION OF YOUR BID ON ITEM I OF INVITATION FOR BID ORD-18-001 61-32 WAS NECESSARY AND, THEREFORE, YOUR PROTEST IS NOT CONSIDERED VALID. FURTHERMORE, EVEN IF YOUR BID OF 81 CENTS PER GALLON COULD LEGALLY HAVE BEEN ACCEPTED A PRICE OF 81 CENTS PER GALLON IS CONSIDERED INORDINATELY HIGH WHEN CONSIDERING SUCH FACTORS AS PRICES PAID UNDERPREVIOUS CONTRACTS FOR BULK MILK AND AN AWARD AT THAT PRICE WOULD UNDOUBTEDLY HAVE NOT BEEN MADE.'

WITH RESPECT TO YOUR ASSERTION THAT YOUR FAILURE TO INSERT YOUR BID UNDER THE PROPER ITEM WAS A "MINOR DISCREPANCY," THERE IS NOTHING IN THE RECORD TO SHOW THAT YOU MADE ANY ALLEGATION OF A CLERICAL ERROR DURING THE TIME YOUR BID WAS BEING CONSIDERED AND WHILE INQUIRIES WERE MADE ABOUT YOUR ABILITY TO SUPPLY NO. I MILK. YOUR BID WAS CLEAR AND UNAMBIGUOUS ON ITS FACE AND IN THE ABSENCE OF ANY ALLEGATION OF ERROR ON YOUR PART, THERE WAS NOTHING TO PLACE THE CONTRACTING OFFICER ON NOTICE OF A POSSIBLE ERROR. YOUR BID WAS, IN FACT, CONSIDERED UNDER ITEM I, AS YOU ASSERTED IT SHOULD HAVE BEEN. REJECTION OF YOUR BID WAS IN ACCORDANCE WITH THE TERMS OF THE INVITATION WHICH PROVIDED THAT AWARDS WOULD BE MADE ONLY TO APPROVED SOURCES. ASSUMING, FOR THE PURPOSE OF ARGUMENT, THAT YOUR SUBSEQUENT OFFER TO SUBCONTRACT ITEM I TO AN APPROVED SUPPLIER COULD BE ACCEPTED, THAT OFFER STILL DOES NOT BRING YOUR BID WITHIN THE TERMS OF THE INVITATION. BECAUSE YOU WERE NOT AN APPROVED SOURCE FOR NO. I MILK WE FIND NO BASIS ON WHICH TO QUESTION THE REJECTION OF YOUR BID ON ITEM I.

YOUR SECOND AND FIFTH CONTENTIONS DEAL PRIMARILY WITH YOUR BELIEF THAT A BID FOR NO. I MILK SHOULD ALSO BE CONSIDERED AS A BID FOR NO. 2 MILK. WHILE IT IS TRUE THAT NO. I MILK MEETS OR EXCEEDS THE REQUIREMENTS FOR NO. 2 MILK, IT DOES NOT LOGICALLY FOLLOW THAT A BID WHICH MUST BE REJECTED FOR NO. I MILK CAN BE CONSIDERED FOR NO. 2 MILK. UNDER THE TERMS OF THE INVITATION, THE FACT THAT YOUR BALTIMORE PLANT IS NOT AN APPROVED SOURCE FOR NO. 1 MILK PRECLUDES YOU FROM FURNISHING NO. 1 MILK FOR ANY PURPOSE. IN ANY EVENT, THE CONTRACTING OFFICER DETERMINED THAT YOUR BID WAS INORDINATELY HIGH IN VIEW OF PREVIOUS CONTRACT PRICES AND THAT AN AWARD WOULD NOT HAVE BEEN MADE IF YOUR BID PRICE OF 81 CENTS PER GALLON EVEN IF YOUR BID COULD HAVE BEEN CONSIDERED FOR ITEM 1A.

THE RECORD BEFORE US DOES NOT SUPPORT YOUR ASSERTION THAT NO NOTIFICATION ABOUT REJECTION OF THE BIDS WAS MADE TO YOUR COMPANY. THE LAST PARAGRAPH ON PAGE ONE OF YOUR LETTER OF SEPTEMBER 27, 1960, AND THE REPORT OF THE CONTRACTING OFFICER BOTH REFER TO A TELEPHONE CONVERSATION ON SEPTEMBER 16, 1960, IN WHICH YOU WERE ADVISED THAT ALL BIDS WOULD BE REJECTED FOR THAT PORTION OF THE INVITATION RELATING TO ITEM 1 AND THAT THE REQUIREMENT WOULD BE READVERTISED. SECTION 2-408.1 OF THE ARMED SERVICES PROCUREMENT REGULATIONS WHICH REQUIRES THAT UNSUCCESSFUL BIDDERS BE NOTIFIED PROVIDES THAT NOTIFICATION MAY BE EITHER ORALLY OR IN WRITING AND THE TELEPHONE CALL SATISFIES THAT REQUIREMENT.

10 U.S.C. 2305 (C) PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES SUCH ACTION TO BE IN THE PUBLIC INTEREST. OUR OFFICE HAS HELD THAT A DETERMINATION PURSUANT TO SUCH AUTHORITY IS NOT ORDINARILY SUBJECT TO REVIEW. 36 COMP. GEN. 364; 17 ID. 554. ADDITION, THE GOVERNMENT UNDER PARAGRAPH 8 (B) OF THE TERMS AND CONDITIONS OF THE INVITATION EXPRESSLY RESERVED THE RIGHT TO REJECT ANY AND ALL BIDS. EVEN IN THE ABSENCE OF SUCH RESERVATION, IT HAS BEEN HELD THAT A REQUEST FOR BIDS DOES NOT IMPART AN OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED, INCLUDING THE LOWEST CORRECT BID. O BRIEN V. CARNEY, 6 F.SUPP. 761; COLORADO PAVING COMPANY V. MURPHY, (CCA 8, 1897) 78 F. 28.

WHILE WE RECOGNIZE THAT REJECTION OF ALL BIDS AFTER OPENING IS A SERIOUS MATTER WHICH MAY OPERATE TO THE DISADVANTAGE OF SOME OR ALL OF THE BIDDERS WHOSE BIDS WERE EXPOSED, THE AUTHORITY OF THE GOVERNMENT TO TAKE SUCH ACTION IN THE PUBLIC INTEREST IS UNQUESTIONED. IN THE PRESENT CASE, REJECTION OF ALL BIDS AND READVERTISING THE REQUIREMENT RESULTED IN AWARD AT A SUBSTANTIALLY LOWER PRICE MORE NEARLY IN LINE WITH PREVIOUS CONTRACT PRICES AND THE ACTION WAS CLEARLY IN THE PUBLIC INTEREST.

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT YOU HAVE NOT PRESENTED ANY BASIS ON WHICH WE MAY VALIDLY OBJECT TO THE DECISION OF THE CONTRACTING OFFICER TO REJECT ALL BIDS AND READVERTISE THE REQUIREMENT IN QUESTION.