[B-142381]

Bids-Evaluation-Delivery Costs-Reduced Rates Filed

After Bid Opening

An evaluation of bids on the basis of driveaway delivery rates when the invitation, which provided that bids would be evaluated on the basis of the most economical mode of commercial transportation, specifically required bidders to include the cost of loading, blocking, and bracing the items on a carrier's facility would be an evaluation on a basis not contemplated by the invitation and contrary to sound procurement procedures.

To permit a bidder after bid opening to offer to ship the equipment by a motor carrier who had then tendered a reduced transportation rate under a section 22 quotation, 49 U.S.C. 22, would be tantamount to reserving to the bidder the right to modify his bid with respect to transportation rates after bid opening and contrary to proper procurement practices which require transportation costs to be evaluated on the basis of the rates actually filed and published at the time the bids are opened.

To the Leach Company, May 16, 1960:

Reference is made to letter of March 24, 1960, with enclosures, and to subsequent correspondence from James J. Hanks, attorney, protesting on your behalf against the award of a contract to any other bidder under Invitation for Bids No. DA-ENG-11-184-60-A-388, issued by the Department of the Army, Corps of Engineers Procurement Office, Chicago, Illinois, covering 102 refuse trucks. It is the contention of your attorney, in substance, that failure or refusal on the part of the contracting officer to use certain specially offered "Driveaway" rates applicable to your equipment, for bid evaluation purposes, is in violation of the terms of the above invitation and established procurement procedures.

The record discloses that in the said invitation, which sought quotations from 15 potential manufacturers of the specified equipment, prospective bidders were apprised that all bids would be evaluated on the basis of the bid price plus the Government's determination of the most economical mode of commercial transportation. Each bidder was required to state the guaranteed shipping weight, and to agree to reimburse the Government for any increased transportation costs if the actual shipping weight exceeded the weight listed in the bid. Also, bidders were required to show their respective f.o.b. shipping points and to include in the unit price quoted their costs for furnishing the completed unit f.o.b. carrier's equipment, rail or other than rail at Government's option, loaded, blocked, and braced. The terms of the invitation, all of which are to be incorporated into the ultimate contract, also stipulated that the units would be transported to destination on a Government Bill of Lading, and that shipping instructions would be issued after award is made.

While the invitation states in general terms that determination of the low bidder would be made on the basis of the most economical mode

of commercial transportation, it seems apparent to us that the specific language "loaded, blocked, and braced" used in the other conditions thereof clearly indicated that "driveway" delivery was not contemplated. Conceding that such method of transportation may be "the most economical mode of commercial transportation," we feel that this language applies only to those methods contemplated under the terms of the invitation. To require bidders to include in their bid price the cost of loading, blocking, and bracing the units on a carrier's facility, and then to evaluate bids on driveaway rates, would be contrary to sound procurement procedures. However, in that connection the record shows that even if driveaway rates published prior to bid opening were used in such evaluation your bid would not be the lowest.

With respect to the contention that the reduced rates of the Kenosha Auto Transport Corporation, offered specially for this transaction under Section 22 (1) of the Interstate Commerce Act of 1887, 49 U.S.C. 22, should be used in the evaluation of your bid, we agree with the requirement in APP 1-306.52c (2) that such rates must be available for evaluation at the time the bids are opened. To permit your shopping for special rates after opening of bids would, we believe, be inconsistent with competitive bidding requirements, and quite obviously would result in no end of confusion. For that reason, under applicable regulations, only rates on file at the time of bid opening may be used in the evaluation of the bids received. No principle is more firmly rooted in the decisions of this Office than the rule that a bidder may not, after bids are opened, offer any amendment or modification of the price or other terms of his bid which would affect his standing with respect to other bidders. Inseparable from this rule is the requirement that bids are generally to be evaluated as of the time of opening. While transportation costs may be calculated on the basis of rates to be effective at the time of shipment, such rates must have been actually filed or published at the time of evaluation. See 35 Comp. Gen. 603. While it is true that in this instance the Kenosha Auto Transport Corporation was not itself a bidder on the contract, we must assume that its offer of a section 22 rate was solicited by you, and would not have been made except as an inducement for the award of a contract to you. By waiting until bids were opened before procuring the offer of the transport company, you in effect reserved to yourself an option either to act or to refrain from acting in that respect, and to consider that offer in the evaluation of bids would be to give effect to a modification in fact obtained by you after bid opening.

We are cognizant of the several decisions heretofore rendered by this Office which are cited by your attorney in support of his position; however, we do not find that the principles enunciated therein are applicable to the controversy here involved.

Since your bid would not be the lowest on a proper evaluation of transportation costs either by rail or by driveaway, the protest of your attorney furnishes no proper basis on which we would be justified in questioning the proposed action of the procuring agency.

[B-140850]

Appropriations-Commencement of Contract Work Prior to Availability of Appropriations-Payment Approval Delay

Notice of award of a construction contract under which the Government might become obligated to make payment to the contractor prior to July 1, when the appropriation for the project becomes available, may not be given, notwithstanding that the contracting officer indicates that he could delay approval of the payment so that it would not be made until after July 1, since such delay beyond a reasonable time would not be effective against the contractor; however, an agreement which provides for early commencement of work, upon condition that the Government will not be under any obligation to make payment prior to the availability of the appropriation, may be made.

To the Secretary of the Interior, May 17, 1960:

Reference is made to letter of April 21, 1960, from the Administrative Assistant Secretary of the Interior, requesting a decision concerning the propriety of a proposed notice of award of a contract to Cleaver-Brooks Special Products, Inc., for the construction of salt water distillation facilities in St. Thomas, Virgin Islands. It is explained that the question presented for decision is related to the matters considered in our decision to you of October 29, 1959, 39 Comp. Gen. 340.

Authorization for the construction and operation of the involved facilities was granted by Public Law 85-913, approved September 2, 1958, 72 Stat. 1759, 1761, 48 U.S.C. 1407c (o). As pointed out in our prior decision, section 3 of the statute places several conditions or restrictions upon the execution of the contract for construction of the salt water distillation facilities, namely, (1) the Government of the Virgin Islands must enter into a suitable contract with the Corporation to purchase a minimum quantity of water at a price established by the Corporation in accordance with the terms of the act; (2) the Secretary of the Interior must conclude that such facilities will most economically and expeditiously provide an adequate supplemental supply of potable water for St. Thomas; and (3) copies of the principal contract for construction of the facilities must be submitted to and rest with the House and Senate Committees on Interior and Insular Affairs for a period of 45 days prior to execution.

In our prior decision it was held, among other things, that although the Government could not be obligated by contract or purchase, unless otherwise authorized by law, until enactment of an appropriation act providing funds with which to make payment, our Office would inter

pose no objection to the execution of a proposed contract prior to the enactment of an appropriation act if such contract specifically provided that the Government's liability would be contingent upon the future availability of appropriations. While we pointed out that such a contract would become operative only if and when the appropriations subsequently should be made, we suggested for clarification purposes that an additional sentence be added to the above provisions to the effect that "No legal liability on the part of the Government for payment of any money shall arise unless and until such appropriation shall be provided."

The Administrative Assistant Secretary states that the three conditions in section 3 of Public Law 85-913 have been met; that a contract has been entered into with the Virgin Islands Government for the purchase of water; that the Secretary has concluded that salt water distillation facilities will most economically and expeditiously provide an adequate supply of potable water for St. Thomas; and that the proposed contract with Cleaver-Brooks Special Products, Inc., has been before the House and Senate Committees on Interior and Insular Affairs for the required time.

It is stated that the proposed contract, which has now been signed and executed, contains the following provisions pertinent to the present request for decision:

A-10. Availability of Funds. Funds are not presently available for the desired equipment. Any contract signed as a result of this invitation shall be contingent upon and shall not be effective until the enactment of legislation by the Congress making a specific appropriation for salt water distillation facilities in St. Thomas, Virgin Islands. No legal liability on the part of the Government for the payment of any money shall arise unless and until such appropriation shall have been provided.

A-11. Submission of Contract to Committees of Congress. Public Law 85-913, which authorizes the construction, operation, and maintenance of salt water distillation facilities in St. Thomas, provides that the contract for the construction of the facilities shall not be executed "until the expiration of forty-five calendar days (exclusive of days on which the House of Representatives or the Senate is not in session because of an adjournment of more than three days to a day certain) from the date on which such construction contract has been submitted to the Committees on Interior and Insular Affairs of the House of Representatives and the Senate." Accordingly, no contract will be signed as a result of this invitation prior to the expiration of such period. A-12. Definitions. As used throughout this contract.

(b) The phrase "notice of award of contract” shall mean the notice given by the contracting officer to the contractor after appropriations are made available by Congress (A-10). This contract shall be effective on the date of receipt of such notice by the Contractor.

(c) The "award of contract" shall be deemed to occur when the Contractor receives such notice.

It is anticipated that the contract resulting from this invitation will be signed and executed following the expiration of the period described in paragraph A-11 hereof, but it is understood that it will not be effective prior to the notice of award of contract.

Also, it is stated that under the terms of the proposed contract, delivery of the unit must be made within 240 days of the contractor's

receipt of notice to proceed and that such notice will be given at the same time the contracting officer gives notice of award.

It is stated further that under any circumstances, a notice of award would not be given prior to May 1, 1960, because the proposed contract contains a progress payment provision under which the contractor might become entitled to payments 60 days after receipt of notice of award; that it is believed irrelevant that the contractor could hypothetically become entitled to payments in a lesser period inasmuch as the period of time is sufficiently within the control of the contracting officer; that under the terms of the proposed contract, which permit progress payments at the contractor's option, the contractor is required to submit—within 60 days of notice of award-a proposed allocation of the total contract price; and that this allocation must be approved by the contracting officer who, it is stated, could reasonably defer his approval, and who will defer his approval until at least 30 days have elapsed from the date of notice of award. In conclusion it is stated that evidence must be submitted by the contractor to support a particular progress payment; that within 30 days thereafter, payment must be made; that inasmuch as the contracting officer will act so as to insure that at least 60 days will elapse, May 1 has been selected as the earliest possible date of notice of award; and that, therefore, no funds will be required to be expended until the fiscal year 1961 has begun.

In light of the foregoing, a decision is requested as to whether the contracting officer may, before July 1, 1960, following enactment of an appropriation act containing a specific appropriation for the facility, give notice of award to Cleaver-Brooks so that it may begin the manufacture of the distillation unit. It is explained that the question arises because it now appears that the Interior Department Appropriation Act for the fiscal year 1961 may become law well in advance of June 30 of this year and that it appears virtually certain that such act will contain a specific appropriation for the involved salt water distillation facilities (Public Law 86-455, approved May 13, 1960, 74 Stat. 104, 119) and that the Department is extremely anxious to move forward with the proposed plant and, if possible, to give the proposed manufacturer notice of award to enable him to proceed some weeks in advance of June 30, thus facilitating earlier completion. Since it will take from 15 to 18 months to build the components needed for the facility and to construct same, and since it is vitally important that the plant be in operation by December 1, 1961 (the beginning of the tourist season), the matter is represented to be urgent because the rationing of water during tourist season has consistently had an adverse effect upon the economy of St. Thomas.

In our decision of October 29, 1959, we advised that we would not be required to object to the execution of a contract prior to the enactment