B-158902, APR. 18, 1966

B-158902, APR. 18, 1966

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE:

BY LETTER DATED APRIL 4, 1966, WITH ENCLOSURES, THE CHIEF, PROCUREMENT MANAGEMENT BRANCH, REQUESTED OUR DECISION AS TO WHETHER CONTRACT NO. PH73- 66-243, AWARDED TO RENO PUMP AND SUPPLY ON MARCH 9, 1966, MAY BE CANCELED FOR THE PURPOSE OF MAKING AN AWARD TO HUNT ENTERPRISES WHICH WAS THE LOW BIDDER UNDER INVITATION FOR BIDS NO. 2985-3-1-66 UPON WHICH THE CONTRACT WAS BASED.

THE INVITATION DATED FEBRUARY 4, 1966, REQUESTED BIDS ON A RESTRICTED SMALL BUSINESS SET-ASIDE BASIS FOR THE INSTALLATION AND COMPLETION OF A DOMESTIC WATER WELL AT THE FORT MCDERMITT INDIAN RESERVATION, NEVADA. BIDDERS WERE ADVISED BY PARAGRAPH 5/B) OF THE INSTRUCTIONS TO BIDDERS THAT WHERE THE BID FORM EXPLICITLY REQUIRES THAT THE BIDDER BID ON ALL ITEMS, FAILURE TO DO SO WILL DISQUALIFY THE BID. A NOTE APPENDED TO PAGE 2 OF THE BIDDING SCHEDULE STATED:

"BIDS MUST BE SUBMITTED ON ALL ITEMS. PARTIAL BIDS WILL NOT BE CONSIDERED RESPONSIVE.'

THE BIDDING SCHEDULE OF THE INVITATION READ AS FOLLOWS:

"PROPOSAL FOR DRILLING, CASING, AND COMPLETION OF ONE DOMESTIC WATER WELL 8 INCHES INSIDE DIAMETER AND APPROXIMATELY 400 FEET DEEP, IN ACCORDANCE WITH THE SPECIFICATIONS HEREIN. THE FOLLOWING BIDDING SCHEDULE IS BASED ON THE ESTIMATED FOOTAGE REQUIRED TO MEET THE SPECIFICATIONS AND TOTAL EXTENDED PRICES SHALL BE USED FOR BID EVALUATION PURPOSES ONLY. THE ACTUAL AMOUNT TO BE PAID BY THE GOVERNMENT UNDER THE CONTRACT SHALL BE COMPUTED ON THE ACTUAL FOOTAGE DRILLED AND CASED AT THE UNIT PRICES BID BELOW.

"1. MOBILIZATION AND DEMOBILIZATION

(ONE TIME ONLY FOR TOTAL JOB): LUMP SUM $---------

"2. DRILLING TO A DEPTH OF APPROXIMATELY

400 FEET, 8 INCHES I.D.:

$----------PER FOOT X 400 EQUALS $---------

"3. CASING APPROXIMATELY 390 FEET,

8 INCHES I.D.:

$----------PER FOOT X 390 EQUALS $---------

"4. GROUTING:

$----------PER FOOT X 20 $---------

"5. HARDROCK DRILLING (SEE PARA. 23

OF SPECIAL CONDITIONS)

$----------ER HOUR X 24 EQUALS $---------1

"6.DELAY TIME (SEE PARA. 22 OF

SPECIAL CONDITIONS)

$----------ER HOUR X 12 EQUALS $----------

"7. DEVELOPMENT TIME (SEE PARA. 14

OF SPECIAL CONDITIONS)

$---------PER HOUR X 24 EQUALS$----------

"8. TEST PUMPING TIME (IF DETERMINED

NECESSARY BY THE ENGINEER--- SEE

PARA. 15 OF SPECIAL CONDITIONS)

$----------PER HOUR X 36 EQUALS $----------

TOTAL SCHEDULE $----------

THREE BIDS WERE OPENED ON MARCH 1, 1966, AND IT APPEARED THAT HUNT ENTERPRISES SUBMITTED THE LOW BID IN THE AMOUNT OF $7,524 FOLLOWED BY THE BIDS OF RENO IN THE AMOUNT OF $9,419.40 AND MYER DRILLING CO., INC., IN THE AMOUNT OF $10,984. SINCE HUNT HAD SUBMITTED A BID OF $7,600, LESS 1- PERCENT DISCOUNT, FOR ONLY ITEM 2 AND HAD USED THE SAME FIGURE AS HIS TOTAL SCHEDULE BID, BUT HAD INSERTED THE WORDS "NO COST TO OWNER" AS HIS BID FOR THE REMAINING ITEMS, THE CONTRACTING OFFICER REJECTED THE BID AS NON- RESPONSIVE TO THE ITEM BIDDING REQUIREMENT OF THE INVITATION. JUSTIFYING HIS REJECTION ACTION AND AWARD TO RENO, THE CONTRACTING OFFICER ADVISED:

"THE PURPOSE IN REQUIRING ITEM BIDS UNDER THE BIDDING SCHEDULE FOR WATER WELL DRILLING RESULTS FROM THE FACT THAT MANY ITEMS ARE VARIABLE (ITEMS 4, 5, 6, 7, AND 8) AND MAY OR MAY NOT BE REQUIRED, AT THE OPTION OF THE GOVERNMENT. IN SOME INSTANCES, SUCH ITEMS MAY BE REQUIRED IN EXCESS OF THE ESTIMATED AMOUNT APPEARING IN THE SCHEDULE, AND UTILIZED FOR EVALUATION PURPOSES. THERE IS ALSO TO BE CONSIDERED THE POSSIBILITY OF ABANDONMENT, (PARAGRAPH 19 OF THE SPECIFICATIONS) IN WHICH EVENT THE UNIT PRICE FOR DRILLING ONLY WOULD APPLY. THE ALL INCLUSIVE UNIT BID PRICE AS PROPOSED BY HUNT ENTERPRISES WOULD NOT PROVIDE AN EQUITABLE PRICE FOR SUCH ADJUSTMENT.

"OBVIOUSLY, THE HUNT ENTERPRISES HAS ENTERED A "CONTINGENCY" BID IN AN ATTEMPT TO ELIMINATE ALL CONTRACTOR RISK AND BY SO DOING ELIMINATE THE METHOD BY WHICH THE GOVERNMENT COULD ELECT TO EXERCISE OPTIONS IN REGARD TO THE VARIABLES UNDER THE SCHEDULES, AND TO MAKE PAYMENT ON A FIRM UNIT PRICE BASIS FOR SERVICES ACTUALLY PERFORMED.'

UPON REVIEW, WE CONCUR IN YOUR OPINION THAT THE LOW BID OF HUNT WAS RESPONSIVE TO THE ADVERTISED SPECIFICATIONS AND THAT AWARD PROPERLY SHOULD HAVE BEEN MADE TO IT IN ACCORDANCE WITH 41 U.S.C. 253/B). THE QUESTION FOR DETERMINATION HERE IS WHETHER THE USE OF THE PHRASE "NO COST TO OWNER" BY HUNT CONSTITUTED A FAILURE TO BID ON ALL ITEMS WITHIN THE MEANING OF PARAGRAPH 5/B) AND THE NOTE ON PAGE 2 OF THE BIDDING SCHEDULE. THESE DIRECTIONS IN THE INVITATION IMPOSED A MANDATORY REQUIREMENT ON BIDDERS TO SUBMIT A PRICE FOR EACH ITEM SO AS TO PERMIT AN EVALUATION BASED ON THE ESTIMATED QUANTITIES OF WORK FOR EACH ITEM. HUNT'S BID WAS A LUMP-SUM TOTAL BID COVERING ALL ITEMS OF THE SCHEDULE WHEREIN IT CLEARLY STATED THAT ITEMS 1 AND 3 THROUGH 8 WOULD BE PROVIDED AT NO COST TO THE GOVERNMENT; THAT IS, AS TO THESE ITEMS, HUNT SUBMITTED A ZERO BID. THIS WAS NOT A FAILURE TO BID WHICH, IN THE USUAL CASE, WOULD REQUIRE BID REJECTION BECAUSE THERE WOULD BE NO ASSURANCE THAT THE BIDDER WOULD BE LEGALLY BOUND TO PERFORM WORK COVERED BY BID ITEMS AS TO WHICH NO BID PRICE WAS ENTERED. CF. 41 COMP. GEN. 412; ID. 721; 43 ID. 579. CONTRARY TO THE CONTRACTING OFFICER'S STATEMENT, QUOTED ABOVE, IT IS OUR OPINION THAT CONTRACT ADMINISTRATION OF THE SPECIAL CONDITIONS RELATING TO THE VARIABLE ITEMS, AND TO PAYMENTS BASED UPON THE ACTUAL AMOUNT OF WORK PERFORMED AT THE UNIT PRICES BID WOULD NOT HAVE BEEN PRECLUDED BY THE FORMAT OF THE HUNT BID. RATHER, HUNT WOULD HAVE BEEN OBLIGATED UNDER HIS BID TO PERFORM UNDER THE SPECIAL CONDITIONS AT NO COST TO THE GOVERNMENT EXCEPT WITH RESPECT TO HIS UNIT BID PRICES FOR DRILLING, AND THE SAME REASONING WOULD APPLY IN THE EVENT IT BECAME NECESSARY TO INVOKE THE ABANDONMENT PROVISIONS OF PARAGRAPH 19 OF THE SPECIAL CONDITIONS.

THE APRIL 4, 1966, LETTER STATES THAT THE CONTRACTING OFFICER WAS ADVISED ON APRIL 1, 1966 TO WITHDRAW THE NOTICE OF AWARD ISSUED TO RENO PENDING RESOLUTION OF THE LEGALITY OF THE AWARD, AND THAT NO WORK HAS COMMENCED AT THE SITE BUT THAT NO INFORMATION IS PRESENTLY AVAILABLE AS TO ANY COSTS WHICH RENO MAY HAVE INCURRED IN PREPARATION FOR CONTRACT PERFORMANCE. ARE ADVISED INFORMALLY, HOWEVER, THAT ANY STARTUP COSTS WOULD BE MINIMAL.

WE NOTE THAT THE CONTRACT CONTAINS A CLAUSE FOR PRICE ADJUSTMENT FOR SUSPENSION, DELAY, OR INTERRUPTION OF THE WORK (ARTICLE 12 OF THE SUPPLEMENTAL TERMS AND CONDITIONS) FOR AN ,UNREASONABLE PERIOD OF TIME.' BY ITS TERMS, THIS ARTICLE CONTEMPLATES, AFTER SUSPENSION, ETC., CONTINUANCE OF THE WORK BY THE CONTRACTOR WITH ALLOWANCE FOR ANY INCREASE IN THE COST OF PERFORMANCE CAUSED BY SUCH SUSPENSION, ETC., BY ORDER OF THE GOVERNMENT. WE, THEREFORE, FEEL THAT THIS ARTICLE IS NOT APPLICABLE HERE WHERE NO WORK HAS BEEN PERFORMED AND WHERE CONTRACT TERMINATION IS CONTEMPLATED. HOWEVER, ASIDE FROM THE FACT THAT THE RENO CONTRACT DID NOT CONTAIN A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT CLAUSE (SEE FEDERAL PROCUREMENT REGULATIONS 1-8.201 (C) AND 1-8.301 (A); 44 COMP. GEN. 466), WE DO NOT BELIEVE THAT THE GOVERNMENT HAS ANY LIABILITY TO RENO FOR STARTUP COSTS OR FOR STANDBY COSTS. HERE, THE INVITATION PROVISION REQUIRING BIDS ON ALL ITEMS WAS STATED WITH CLARITY, AND THE FACT THAT A PARTICULAR BIDDER CHOSE, IN EFFECT, TO BID ZERO ON SEVERAL ITEMS AFFORDED NO LEGAL BASIS TO REJECT ITS BID AND MAKE AN AWARD TO OTHER THAN THE LOW BIDDER. THE INTERPRETATION OF HUNT'S BID AS NONRESPONSIVE BY THE CONTRACTING OFFICER WAS CLEARLY ERRONEOUS. HENCE, THE ILLEGALITY OF THE AWARD WAS PLAIN; IT WAS NOT AN AWARD TO THE LOWEST RESPONSIVE BIDDER AS IS REQUIRED BY 41 U.S.C. 253 (B). THE CONTRACTING OFFICER EXCEEDED HIS ACTUAL AUTHORITY IN AWARDING THE CONTRACT TO RENO IN CONTRAVENTION OF THAT STATUTE. THE GOVERNMENT IS NOT ESTOPPED TO DENY THE LIMITATIONS TO SUCH ACTUAL AUTHORITY EVEN WHERE A PRIVATE CONTRACTOR HAS RELIED ON THE CONTRACTING OFFICER'S APPARENT AUTHORITY TO HIS DETRIMENT, FOR THE CONTRACTOR IS CHARGED WITH NOTICE OF ALL STATUTORY AND REGULATORY LIMITATIONS. PRESTEX INC. V. UNITED STATES, 320 F.2D 367. WITH RESPECT TO THE FOREGOING, SEE 44 COMP. GEN. 221 WHERE WE DENIED COMPENSATION TO A TERMINATED CONTRACTOR WHO HAD RECEIVED AN AWARD IN VIOLATION OF THE MILITARY PROCUREMENT STATUTE. IN THAT CASE, AS HERE, THE PRINCIPLES OF JOHN REINER AND COMPANY V. UNITED STATES, 325 F.2D 438, AND BROWN AND SON ELECTRIC COMPANY V. UNITED STATES, 325 F.2D 446, WERE DISTINGUISHABLE IN ARRIVING AT OUR HOLDING THAT THE AWARD WAS INVALID. SEE, PARTICULARLY, THE DISCUSSION ON PAGES 222-223 OF OUR ABOVE-CITED DECISION.

ACCORDINGLY, YOU ARE ADVISED THAT THE CONTRACT AWARDED TO RENO PUMP AND SUPPLY, WHO HAS BEEN FURNISHED A COPY OF THIS DECISION, SHOULD BE CANCELED WITHOUT LIABILITY TO THE GOVERNMENT FOR ANY STARTUP COSTS. IN THE EVENT THAT AWARD IS MADE TO HUNT ENTERPRISES ON ITS BID, NO CONSIDERATION SHOULD BE GIVEN TO THE AMENDMENT TOITS BID RECEIVED AFTER BID OPENING WHEREIN A BID PRICE PER FOOT OF DRILLING WAS OFFERED IN THE CASE OF ABANDONMENT OF THE WORK. 17 COMP. GEN. 554. THE FILE ENCLOSED WITH THE APRIL 4, 1966, LETTER IS RETURNED HEREWITH AS REQUESTED.