B-152989, APR. 6, 1964

B-152989, APR. 6, 1964

TO UNIVERSAL BRICK AND SUPPLY COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27, 1963, PROTESTING THE SALE OF A PORTION OF THE KINGSBURY ORDNANCE PLANT, LA PORTE, INDIANA, TO THE EXCHANGE NATIONAL BANK OF CHICAGO, AS TRUSTEE.

YOUR PROTEST CONCERNS THE SALE OF 6,845 ACRES OF THE 11,818 ACRE TRACT REPORTED EXCESS TO GSA BY THE DEPARTMENT OF DEFENSE IN MARCH 1961. ON MAY 3, 1963, SEALED BIDS TO BE OPENED JUNE 7, 1963, AT 3 P.M., C.D.S.T. WERE INVITED ON 24 PARCELS. IN ORDER TO MEET THE INDIVIDUAL REQUIREMENTS OF THE MANY PROSPECTIVE BIDDERS AND WITH A VIEW TO SECURING THE MAXIMUM POSSIBLE MONETARY RETURN THE PROPERTY WAS OFFERED ON AN ALTERNATIVE BID BASIS, NAMELY, AS A SINGLE UNIT OR ON THE BASIS OF THE 24 INDIVIDUAL PARCELS OR ANY COMBINATION THEREOF. A TABULATION OF THE BIDS RECEIVED SHOWS THAT YOU SUBMITTED THE HIGHEST BID ON PARCEL NO. 1 IN THE AMOUNT OF $5,850 AND THAT THIS PARTICULAR PARCEL HAD BEEN APPRAISED AT $45,000. GENERAL SERVICES ADMINISTRATION HAS REPORTED THAT AT THE BID OPENING HIGH BIDS FOR THE PROPERTY AS INDIVIDUAL PARCELS TOTALING $1,524,898 AND A HIGH BID OF $1,411,010 FOR THE PROPERTY AS A SINGLE UNIT WERE RECEIVED.

GSA HAS FURTHER REPORTED THAT THE TOTAL APPRAISED FAIR MARKET VALUE OF THE PROPERTY AS INDIVIDUAL PARCELS WAS ESTIMATED AT $1,991,000; THAT THE APPRAISED FAIR MARKET VALUE AS A UNIT WAS ESTIMATED AT $1,970,000, AND THAT SINCE THE BIDS RECEIVED AT THE PUBLIC SALE WERE NOT CONSIDERED TO BE REASONABLY COMMENSURATE WITH THE APPRAISED FAIR MARKET VALUE ESTIMATES THE BENEFITS OF THE INVITATION FOR BIDS WERE EXTENDED BY AFFORDING THE HIGH INDIVIDUAL BIDDERS AND THE HIGHEST UNIT BIDDER AN OPPORTUNITY TO INCREASE THEIR BIDS, AFTER THE REJECTION OF ALL OTHER BIDS RECEIVED. AS A RESULT OF THIS ACTION THE HIGH BIDDERS FOR THE INDIVIDUAL PARCELS INCREASED THEIR BIDS TO A TOTAL AMOUNT OF $1,594,644 AND THE HIGH BIDDER ON A UNIT BASIS, THE EXCHANGE NATIONAL BANK OF CHICAGO, AS TRUSTEE OF TRUST NO. 15957, INCREASED ITS BID TO $1,612,010. YOUR COMPANY INCREASED ITS BID ON PARCEL NO. 1 TO $10,100.

GSA HAS REPORTED THAT WHILE THE HIGH UNIT BID OF $1,612,010 DID NOT EQUAL THE APPRAISED FAIR MARKET VALUE OF THE PROPERTY ON A UNIT BASIS, BECAUSE OF THE MANY BIDS RECEIVED IN THE SAME PRICE RANGE FROM THE HIGH BIDDERS ON INDIVIDUAL PARCELS UPON THE SOLICITATION, IT WAS CONCLUDED THAT READVERTISEMENT OF THE PROPERTY WOULD NOT BRING ANY SUBSTANTIAL INCREASE, IF ANY, IN OFFERS SUFFICIENT TO JUSTIFY THE COSTS OF READVERTISEMENT. ACCORDINGLY, ON OCTOBER 10, 1963, AN AWARD WAS MADE TO THE EXCHANGE NATIONAL BANK OF CHICAGO AS TRUSTEE UNDER TRUST NO. 15957 AND ON OCTOBER 10, 1963, THE PROPERTY WAS DEEDED TO THE BENEFICIARY OF THE SUCCESSFUL BIDDER.

IT IS YOUR CONTENTION THAT GSA EMPLOYED ILLOGICAL AND INCONSISTENT METHODS IN EFFECTING THE SALE IN CONTRAVENTION OF GENERAL GOVERNMENTAL POLICY. SPECIFICALLY, YOU CONTEND THAT THE VALUE OF WATER AND SEWERAGE FACILITIES (REFERRED TO UNDER UTILITIES AND IMPROVEMENTS OF THE PROSPECTUS) WHEN ADDED TO THE INDIVIDUAL HIGH BIDDERS' AGGREGATE NEGOTIATED PRICE EXCEEDS THE NEGOTIATED PURCHASE PRICE OFFERED BY THE SUCCESSFUL BIDDER. FURTHER, YOU REFER TO CERTAIN CORRESPONDENCE INDICATING THAT THE PURCHASER OF THE 24 PARCELS IS WILLING TO CONTINUE NEGOTIATIONS WITH THE INDIVIDUAL BIDDERS AND YOU STATE THAT THIS SHOWS THAT GSA DID NOT OBTAIN THE MOST FAVORABLE PRICE FOR THE PROPERTY. YOU CONTEND THAT THE INDIVIDUAL HIGH BIDS IN RESPONSE TO THE ADVERTISEMENT WERE WITHIN A REASONABLE RANGE OF THE APPRAISED VALUE AND THAT, THEREFORE, THE HIGH BID ON A UNIT BASIS SHOULD HAVE BEEN TREATED AS AN UNSUCCESSFUL INDIVIDUAL BID AND SHOULD HAVE BEEN REJECTED. IN CONCLUSION YOU CONTEND THAT PERMITTING SUBSEQUENT NEGOTIATIONS WITH THE HIGH BIDDER ON A UNIT BASIS UNDER THE CIRCUMSTANCES CONSTITUTED PREFERENTIAL TREATMENT SINCE THE BIDS UPON OPENING BECAME PUBLIC INFORMATION WHICH WAS MORE BENEFICIAL TO THE HIGH BIDDER ON A UNIT BASIS THAN TO THE BIDDERS ON INDIVIDUAL PARCELS. WHILE GSA HAS REPORTED THAT YOUR STATEMENT CONCERNING THE WATER AND SEWERAGE FACILITIES IS NOT UNDERSTOOD IT HAS POINTED OUT, HOWEVER, THAT THE WATER TREATMENT PLANT AND THE SEWAGE DISPOSAL PLANT ARE LOCATED ON PARCELS NOS. 21 AND 19, RESPECTIVELY, AND THAT THE AMOUNTS BID ON THESE TWO PARCELS WERE INCLUDED AS A PART OF THE AGGREGATE AMOUNT OF THE INDIVIDUAL BIDS RECEIVED ON THE 24 PARCELS.

CONCERNING YOUR COMPLAINTS AS TO THE MANNER IN WHICH THE SALE WAS CONDUCTED YOU ARE ADVISED THAT THE BASIC AUTHORITY FOR THE SALE OF SURPLUS PROPERTY IS PROVIDED FOR BY SECTION 203 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 484. PARAGRAPH (E) (1) OF SECTION 203 AS AMENDED BY THE ACT OF JULY 2, 1958, 72 STAT. 288, PROVIDES THAT ALL DISPOSALS OR CONTRACTS FOR DISPOSAL OF SURPLUS PROPERTY MADE OR AUTHORIZED BY THE ADMINISTRATOR OF GSA SHALL BE MADE AFTER PUBLICLY ADVERTISING FOR BIDS, UNDER REGULATIONS PRESCRIBED BY HIM. PARAGRAPH (E) (3) (F) OF THE SAME SECTION PROVIDES THAT DISPOSALS AND CONTRACTS FOR DISPOSAL MAY BE NEGOTIATED, UNDER REGULATIONS PRESCRIBED BY THE ADMINISTRATOR WITHOUT REGARD TO THE ADVERTISING REQUIREMENTS BUT SUBJECT TO OBTAINING SUCH COMPETITION AS IS FEASIBLE UNDER THE CIRCUMSTANCES, IF---

"BID PRICES AFTER ADVERTISING THEREFOR ARE NOT REASONABLE (EITHER AS TO ALL OR SOME PART OF THE PROPERTY) OR HAVE NOT BEEN INDEPENDENTLY ARRIVED AT IN OPEN COMPETITION.'

REGULATIONS PROMULGATED BY THE ADMINISTRATOR WHICH ARE PERTINENT TO THE SALE ARE PROVIDED FOR AS FOLLOWS (44 CFR 110.32):

"* * * ANY OR ALL OFFERS MAY BE REJECTED WHEN THE HEAD OF THE DISPOSAL AGENCY OR HIS DESIGNEE DETERMINES IT IS IN THE PUBLIC INTEREST TO DO SO.

"/1) WHENEVER THE ADVERTISING DOES NOT RESULT IN THE RECEIPT OF A BID AT A PRICE COMMENSURATE WITH THE FAIR MARKET VALUE OF THE PROPERTY, THE HIGHEST BIDDER MAY, AT THE DISCRETION OF THE HEAD OF THE DISPOSAL AGENCY OR HIS DESIGNEE, AND UPON DETERMINATION OF RESPONSIVENESS AND BIDDER RESPONSIBILITY, BE AFFORDED AN OPPORTUNITY TO INCREASE HIS OFFERED PRICE. THE BIDDER SHALL BE GIVEN A REASONABLE PERIOD OF TIME, NOT TO EXCEED FIVE (5) WORKING DAYS, TO RESPOND. AT THE TIME THE BIDDER IS AFFORDED AN OPPORTUNITY TO INCREASE HIS BID, ALL OTHER BIDS SHALL BE REJECTED AND BID DEPOSITS RETURNED. ANY SALE AT A PRICE SO INCREASED MAY BE CONCLUDED WITHOUT REGARD TO THE PROVISIONS OF SEC. 110.30.

"/3) IT IS WITHIN THE DISCRETION OF THE HEAD OF THE DISPOSAL AGENCY OR HIS DESIGNEE TO DETERMINE WHETHER THE PROCEDURE AUTHORIZED BY SUBPARAGRAPH (1) OF THIS PARAGRAPH IS FOLLOWED OR WHETHER THE BIDS SHALL BE REJECTED AND THE PROPERTY REOFFERED FOR SALE ON A PUBLICLY ADVERTISED COMPETITIVE BID BASIS IN ACCORDANCE WITH THE PROVISIONS OF SEC. 110.28, OR DISPOSED OF BY NEGOTIATION PURSUANT TO SEC. 110.34, OR OFFERED FOR DISPOSAL UNDER OTHER APPLICABLE PROVISIONS OF THIS PART.'

AS NOTED ABOVE PARAGRAPH (E) (3) (F) OF SECTION 203 OF THE ACT, AS AMENDED, PERMITS NEGOTIATED SALES WHEN BID PRICES AFTER ADVERTISING ARE NOT REASONABLE EITHER AS TO ALL OR SOME OF THE PROPERTY. THE REGULATIONS, HOWEVER, AUTHORIZE NEGOTIATION IN SITUATIONS SUCH AS HERE INVOLVED (WHEN ADVERTISING DOES NOT RESULT IN RECEIPT OF A BID PRICE COMMENSURATE WITH THE FAIR MARKET VALUE OF THE PROPERTY) ONLY WITH THE HIGHEST BIDDER FOR THE PURPOSE OF AFFORDING HIM AN OPPORTUNITY TO INCREASE HIS OFFERED PRICE. IN THIS INSTANCE, THE INVITATION STATED THAT THE PROPERTY WAS "TO BE SOLD AS TWENTY-FOUR SEPARATE PARCELS, ANY COMBINATION OF PARCELS, OR IN ITS ENTIRETY.' SINCE THE AGGREGATE AMOUNT OF THE BIDS SUBMITTED BY THE BIDDERS ON THE INDIVIDUAL PARCELS EXCEEDED THE AMOUNT OF THE HIGHEST UNIT BIDDER, ONLY THE BIDDERS ON THE INDIVIDUAL PARCELS SHOULD HAVE BEEN AFFORDED AN OPPORTUNITY TO INCREASE THEIR BIDS. SEEMINGLY, THE CONTRACTING OFFICER REGARDED THE HIGHEST BIDDER ON A UNIT BASIS IN THE SAME CATEGORY AS THE HIGHEST BIDDERS ON THE INDIVIDUAL PARCELS. WHILE THE ACTION TAKEN BY THE CONTRACTING OFFICER IN AFFORDING THE HIGHEST UNIT BIDDER AN OPPORTUNITY TO INCREASE ITS BID PRICE WAS IN ERROR HIS ACTION IN THIS RESPECT UNDER THE CIRCUMSTANCES INVOLVED WAS NOT SO ERRONEOUS AS TO REQUIRE OUR OFFICE TO OBJECT TO THE TRANSACTION, PARTICULARLY SINCE THE PROPERTY HAS NOW BEEN CONVEYED TO THE BENEFICIARY OF THE HIGHEST UNIT BIDDER AND SINCE EVEN IF THE LATTER BID HAD NOT BEEN ACCEPTED THERE WOULD HAVE BEEN NO REQUIREMENT ON THE CONTRACTING OFFICER TO ACCEPT THE HIGHEST AGGREGATE BID OF THE INDIVIDUAL BIDDERS.