Albano Cleaners, Inc. v. United States

455 F.2d 556 | Ct. Cl. | 1972

Per Curiam :

This case was referred to Trial Commissioner Saul Richard Gamer with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 134(h). The commissioner has done so in an opinion and report filed on October 7, 1971. No exceptions to or brief on this opinion and report have been filed by the parties and the times for so filing pursuant to the rules of the court have expired. On December 23, 1971, plaintiff filed a motion for judgment pursuant to Kule 141(b) requesting that the court adopt the commissioner’s findings of fact, opinion and recommendation for conclusion of law and enter judgment accordingly. Defendant has filed no response to this motion, the time for so responding has expired and the case has been submitted to the court without oral argument.

Since the court agrees with the commissioner’s opinion, findings of fact and recommended conclusion of law, as hereinafter set forth, it hereby, granting plaintiff’s motion, adopts the same as the basis for its judgment in this case. Therefore, it is concluded that plaintiff is entitled to recover and judgment is entered for plaintiff with the amount of recovery to be determined pursuant to Rule 131 (c).

OPINION OF COMMISSIONER

Gamer, Commissioner: This is another case in which the Government, shortly after awarding a contract, terminated it on the ground that the award had been improper. The plaintiff contractor contends the Government’s action constituted a breach of contract, for which it seeks recovery of the expenditures it made to perform the contract and of its anticipated profits. The contract was to be in effect for one year but was ended after less than one month.

On September 8, 1966, the Naval Supply Center at Norfolk, Virginia, invited bids for the furnishing of laundry, drycleaning, waterproofing, and repair services on various designated garments and other items. The services and items were set forth in four “Lots,” with bidders to indicate a unit price for each item in the lot upon which they submitted a bid. Five “Zones” were designated, consisting of specified areas in and around Norfolk (where several naval installations are located), the unit price for each item to be set forth for each zone. Plaintiff, which had held similar contracts in previous years, submitted a bid on two of the lots — Lots III and IV. On the basis of the overall unit prices, plaintiff was the second lowest bidder on Lot IV, which pertained to garments referred to as “foul weather gear.”

The Supply Center decided, however, that, with respect to Lot IV, it would not award the contract to the bidder, Compeco Cleaners, whose unit prices were, on an overall basis, the lowest. This decision was based upon the fact that Com-peco had inserted a qualification in its bid to the effect that minimum order charges would apply — $6 per order if the items were transported by Government vehicles, and $15 per order if the items were picked up and delivered by the contractor. Accordingly, a contract with respect to Lot IV was awarded to plaintiff, the contract term being for one year, commencing October 1, 1966.

Thereupon, Compeco protested its failure to receive the award. It pointed out that a similar minimum charge provision had been included in a contract it then currently held with the Center, as well as in seven contracts it had had during the past eight years, and that the provision had not theretofore been considered disqualifying.

Plaintiff had also inserted a qualification in its bid. This qualification was that “[d]elivery services will not be offered on orders totaling less than $50.” Following consideration of Compeco’s protest, defendant decided to terminate its contract relationship with plaintiff. On October 28, 1966, after plaintiff had been performing the contract since October 1, 1966, the Center notified plaintiff by letter that its contract “is hereby withdrawn because bid submitted in response” to the invitation “was improper inasmuch as the invitation did not provide for ‘minimum order’ charges.” During the brief period the contract had been in effect, defendant had ordered and paid for services totaling over $1,000.

Plaintiff protested the termination by conferences and correspondence, during the course of which (a) defendant contended that the qualification plaintiff had inserted made its bid nonresponsive, that the award to plaintiff was therefore improper, and that the award had been made as a result of administrative error (it had allegedly faded to notice the qualification); and (b) plaintiff denied that its qualification established any “minimum order” charge as stated in defendant’s letter and asserted that defendant’s standard practice in prior years was to accept bids containing a qualification of the kind in question. Failing to obtain reinstatement of its contract, this suit followed.¹

Defendant here reiterates that the qualification plaintiff inserted served to make its bid nonresponsive and disqualifying, that the award of the contract to plaintiff was therefore improper, making the contract void db initio, and that the withdrawal of the contract was consequently justified. It is true that in an appropriate case defendant may disclaim a contract on the ground of voidness db initio because of the nonresponsiveness of the bid. Where a public contract is to be let pursuant to formal advertising, the strictures upon defendant’s contracting agent are such “that the contract awarded must be the contract advertised and * * * if it is not, the Government is not bound, since defendant’s contracting agent could not bind the Government beyond his actual authority.” Prestex Inc. v. United States, 162 Ct. Cl. 620, 625, 320 F. 2d 367, 371 (1963).

It is plain, however, that this is not such a case. Every bid deviation from an advertised proposal does not automatically compel rejection. Contracting officers may waive deviations “provided they do not go to the substance of the bid or work an injustice to other bidders. A substantial deviation is defined as one which affects either the price, quantity, or quality of the article offered.” Prestex Inc. v. United States, supra, 162 Ct. Cl. at 627, 320 F. 2d at 372. Thus, “[t]he pertinent question * * * is whether plaintiff’s [bid] represented a substantial deviation.” Id. Defendant, of course, argues that the qualification plaintiff inserted in its bid constituted such a substantial deviation, whereas plaintiff asserts otherwise.

Whether a qualification such as plaintiff inserted in its bid was substantial or insubstantial cannot be determined in a vacuum. The judgment must be made against the factual background of the particular procurement involved, and this can best be made by those familiar with and expert in the specific problems incident to the procurement. There is nothing on the face of the qualification that would compel one who is unfamiliar with the complexities of the industry or the problems relating to the particular areas involved to conclude, considering the size of the contract and the amount of orders that could reasonably be expected to be placed thereunder from the various geographical zones, that the qualification was a substantial one, nor is there anything in the evidence that leads to such a conclusion. Indeed, the evidence points the other way. For years, it was the judgment of knowledgeable officials in charge of such procurement that similar qualifications were not of such substantiality as to necessitate bid rejection, nor was it originally thought so on this particular procurement. Apparently what had theretofore consistently been considered, in contracts calling for services of the type here involved, as insubstantial in the setting of the naval installations located in the Norfolk area, was suddenly, upon the protest of a competitor, determined to be substantial.

The proper approach in a case “testing the enforceability of an award made by the Government, where a problem of the * * * responsiveness of the accepted bid arises after the award” is that “the court should ordinarily impose the binding stamp of nullity only when the illegality is plain.” John Reiner & Co. v. United States, 163 Ct. Cl. 381, 386, 325 F. 2d 438, 440 (1963), cert. denied, 371 U.S. 931 (1964). There, the court pointed out that “[a]ny other course could place the contractor in an unfortunate dilemma” because of the liabilities to which he would be exposed if he refused to accept the contract by reason “of his own doubts as to possible illegality * * *.” Id. If the contractor in such a situation decides to commence “performance of the contract, a subsequent holding of non-enforceability would lead to denial of all recovery under the agreement even though the issue of legality is very close; and under the doctrine of quantum meruit there would be no reimbursement for expenses incurred in good faith but only for any tangible benefits actually received by the defendant.” 163 Ct. Cl. at 387, 325 F. 2d at 440.

It is therefore just to the contractor, as well as to the Government, to give him the benefit of reasonable doubts and to uphold the award unless its invalidity is clear.

In “applying that norm” and refusing to consider the “award to have been a nullity,” the court in Reiner too looked to the “other occasions” wherein the contractor had answered “the same type of invitation” and “had been granted the contracts,” such method of purchasing having become “an accepted form of procurement by” the agency there involved. 163 Ct. Cl. at 387, 325 F.2d at 440-41. Similar instances in which the court, following the Reiner approach, has refused to invalidate an award are Mid-West Constmcetion, Ltd. v. United States, 181 Ct. Cl. 774, 387 F.2d 957 (1967); Warren Brothers Roads Co. v. United States, 173 Ct. Cl. 714, 355 F.2d 612 (1965); Coastal Cargo Co. v. United States, 173 Ct. Cl. 259, 351 F.2d 1004 (1965); and Brown & Son Electric Co. v. United States, 163 Ct. Cl. 465, 325 F.2d 446 (1963).

This is not to say that the Supply Center would be forever estopped from ceasing to grant contracts containing such a qualification if it decided to do so as a matter of judgment and policy, and as it apparently did with respect to another kind of qualification which Oompeco had employed. But this is entirely different from awarding a contract with such a qualification, as it had done for many years, and then asking a court to declare its award action a nullity on the ground of its own alleged illegality. While the erroneous use of an illegal procedure in similar procurements is immaterial where the practice is plainly forbidden by statute or regulation, Schoenbrod v. United States, 187 Ct. Cl. 627, 410 F.2d 400 (1969), such an established practice is, as shown by Reiner, relevant, in cases not involving plain illegality, in considering the question of ibid responsiveness 'and agency reasonableness in treating a qualification as insubstantial.

Defendant argues further that, because the contracting officer, in making the award, did not personally know of the qualification (the officer so testified), there was no meeting of the minds and that no valid contract was, therefore, ever formed. The contracting officer had not personally read in its entirety the Invitation for Bids, upon which plaintiff’s bid was submitted and which included the qualification it had inserted on page 14. This contention has no merit. A unilateral mistake, even assuming there was one here,² does not serve to relieve a party of his contractual obligations. Allied Contractors, Inc. v. United States, 159 Ct. Cl. 548, 810 F. 2d 945 (1962). “Any other rule would throw chaos into all contract arrangements because a party could avoid responsibility thereunder at his convenience simply by saying that he had signed the contract without reading it.” Schoeffel v. United States, 193 Ct. Cl. 923, 935 (1971). There is no showing that the officials to whom had been delegated the responsibility of the opening of the bids, of examining and comparing them, and of recommending the bidder who should receive the award, did not know of the qualification, nor is there any valid showing that plaintiff did anything improper (as defendant intimates) by inserting the qualification in the particular place in its bid submission that it did, i.e., hi the portion relating to deliveries, rather than in the section in which the unit prices were inserted. Furthermore, the inference that the contracting officer would not have executed the award to plaintiff had he known of the qualification is not justified. Although what the contracting officer would have done had he personally known of the qualification at the time he executed the award is, of course, speculative, there is every reason to believe that, upon, being informed by those responsible for evaluating the bids concerning their recommendation as to who the successful bidder should be and as to what the past practice had been, he too would have executed the award anyway, as had the contracting officers in the past.

Defendant also defends upon the basis of the “Indefinite Quantities” section of the contract. Under this provision, defendant’s contractual obligation to plaintiff was to “order supplies hereunder having an aggregate value at the unit prices specified herein of not less than $10.00.” Defendant says that the amount of cleaning and repair service of foul weather gear that would be required could not be known in advance, and that, since the Supply Center actually did order more than $10 worth of services, it has satisfied its obligations under the contract.

This contention too is unacceptable. The controversy here is not based upon a failure to supply a specified amount of business during the contract term. The quantity of services was, to be sure, only estimated, to be paid for at unit prices for whatever amount of orders defendant placed (the estimated amount of the contract being $61,774.44). The controversy is, instead, about terminating a one-year’s contract after less than a month. Over the contract term plaintiff did not have a right to any specific amount of business (the amount in part depending on the needs of incoming vessels), but it did have a right to receive whatever business of the type covered by the contract was generated in the specified contract areas (“Zones”) for the full one-year contract period. Defendant could not, after ordering $10 worth of services, thereupon further disregard the contract and order the identical services elsewhere. If defendant decided, in its best interests, to terminate the contract, the contract afforded a proper method of so doing, since it contained the standard “Termination For Convenience” provisions. However, a termination under these provisions requires, in fairness to the contractor, compensating him in accordance with a specified formula. The contractor is at least entitled to recover the expenses he incurred in preparing to fulfill his contractual obligations. An attempted termination under the indefinite quantities clause after ordering the minimum services there specified and without any further responsibility would plainly conflict with the obligations imposed by the termination-for-convenience provisions. Whatever the permissible scope of such an indefinite quantities provision is (see, e.g., The Tennessee Soap Co. v. United States, 130 Ct. Cl. 154, 126 F. Supp. 439 (1954)), such an unusual and unfair interpretation of the clause here involved as defendant proposes could hardly have been in accord with “the rational intention of the parties” when they entered into this contract, Ozark Dam Constructors v. United States, 130 Ct. Cl. 354, 360, 127 F. Supp. 187, 191 (1955), and the court would not be justified in adopting it.

Defendant additionally contends that, if it is held liable, the amount of plaintiff’s recovery should be determined in accordance with the termination-for-convenience provisions rather than measured by the damage principles relating to breach of contract. In this respect defendant is correct. It seems clear that, in view of the protest, and the policy or other problems it raised, plaintiff’s contract could, within the permissible discretion of the contracting officer, properly have been terminated under the termination-for-convenience provisions. G. C. Casebolt Co. v. United States, 190 Ct. Cl. 188, 787, 421 F.2d 712-13 (1970).³ As the court there held, in such a situation:

The rule we have followed is that, where the contract embodies a convenience-termination provision * * *, a Government directive to end performance of the work will not be considered a breach but rather a convenience termination — if it could lawfully come under that clause — even though the contracting officer wrongly calls it a cancellation, mistakenly deems the contract illegal, or erroneously thinks that he can terminate the work, on some other ground. [⁴] (190 Ct. Cl. at 786, 421 F.2d at 712]

Accordingly, plaintiff’s recovery is to be determined in accordance with the formula specified in the termination-for-convenience article, which precludes compensation for loss of prospective profits. Brown & Son Electric Co. v. United States, supra; Nesbitt v. United States, 170 Ct. Cl. 666, 671, 345 F.2d 583, 586 (1965), cert. denied, 383 U.S. 926 (1966) ; G. C. Casebolt Co. v. United States, supra.

Lastly, defendant, relying on Schlesinger v. United States, 182 Ct. Cl. 571, 390 F.2d 702 (1968), urges that, in the event the court allows recovery on the theory that a valid contract existed and in accordance with the termination-for-convenience article of the contract, the proceedings here should be suspended and plaintiff required to seek the administrative remedies available under such article. Schlesinger is not in point on this procedural issue. There, a termination was effected under a contract “Default” clause, a decision having been made by the contracting officer under the contract “Disputes” clause that plaintiff was in default. The contracting officer’s decision was appealed to the Armed Services Board of Contract Appeals, which upheld the default termination. This court held, however, that, upon the facts found by the Board, and under the circumstances there involved, the termination should be considered as one for the convenience of the Government, and, concluding that “the determination of the award must be made, if the parties cannot agree, by the ASBCA in further proceedings before it,” suspended further action in this court “to allow the parties to return to the Armed Services Board of Contract Appeals for a determination of the amount, if any, to which plaintiff would have been entitled if his contract had been terminated pursuant to the convenience-termination article.” 182 Ct. Cl. at 585, 390 F.2d at 710. Such a procedure is analogous to that involved- in proceedings under the Wunderlich Act, 41 U.S.C. §§ 321-22 (1964), in which the decision of an agency contract appeals board is being reviewed and it is held that further board proceedings are necessary. See, e.g., J. A. Jones Construction Co. v. United States, 182 Ct. Cl. 615, 628, 390 F.2d 886, 893-94 (1968).

In the instant case, however, there was no dispute between the parties concerning any alleged default by plaintiff - in contract performance, or any actual termination for such a purported default under any contract default clause, Nor were there 'any appeal proceedings before any agency appeals board under the contract Disputes clause, there having been no contracting officer’s decision under such, clause for the contractor to appeal. Defendant does not contend that any contract provision obligated plaintiff to appeal the contracting officer’s notification that its contract was “withdrawn” because the original award to it which defendant had made “was improper.” In such a case, as was held in Brown & Son Electric Co. v. United States, supra, 163 Ct. Cl. at 472-73, 325 F.2d at 450:

* * * It might be argued that this determination [the amount of the recovery] should first be made within the Defense Department by the contracting officer and the Board of Contract Appeals. We do not follow that course, however. This is not a case in which the contract was actually terminated (or sought to be terminated) under the termination article. It is a case in which the agreement was cancelled for other reasons, now found to be wrong * * *. In such a case, there is no requirement of the contract or the Wunderlich Act, 41 U.S.C. §§ 321-322, that the damages be computed administratively; the termination article is invoked only as the limiting measure of recovery not as its source. The case comes to the court without any prior proceedings before the agency tribunals. * * * A trial commissioner can take the necessary evidence and make the initial determination, following as nearly as he can the criteria of the termination article. * * *

To the same effect are Coasted Cargo Co. v. United States, supra, 173 Ct. Cl. at 264-65, 351 F.2d at 1008, and Warren Brothers Roads Co. v. United States, supra, 173 Ct. Cl. at 723, 355 F.2d at 616.

Based upon the foregoing, plaintiff is entitled to recover an amount to be calculated in accordance with the Termination For Convenience article, such amount to be determined in proceedings pursuant to Rule 131 (c).

Findings or Fact

1* Plaintiff is a corporation organized under the laws of the State of Virginia, with its principal place of business in Norfolk, Virginia.

2. (a) Invitation for Bids No. N00189-67-B0068 was issued by theU.S. Naval Supply Center, Purchase Department, Norfolk, Virginia, on September 8,1966. The invitation was for the furnishing of services and material to dry-clean, waterproof, and repair assorted garments and other items used at specified installations of the Navy in Virginia. The garments and items were listed under four separate lots. Lot IV, which is the part of the invitation relevant to this action, concerned providing dry-cleaning, waterproofing, and repair services for “foul weather gear” used by Navy installations in the Norfolk, Portsmouth, Little Creek, Oceana, and Dam Neck areas of Virginia. The areas were divided into five “Zones.”

(b) The invitation provided, with respect to Lot IV, that “ [g]arments shall he called for by the contractor at the point specified by the representative of vessel or activity” within 24 hours “after receipt of each order,” and that “ [f jinished garments shall be returned to the point specified in the order within” five days “after pick-up by the contractor.” It was also provided that “[p]ick-up and deliveries shall be at contractor’s expense.”

(c) Other contract provisions were as follows:

BIDDING instructions, TERMS, AND CONDITIONS (SUPPLY contract)

8. Award of Oontract. — (a) The contract will be awarded to that responsible bidder whose bid, conforming to the Invitation for Bids, will be most advantageous to the Government, price and other factors considered. * * *

CONTINUATION SHEET (SUPPLY CONTRACT)

6.1 General Provisions Incorporated by Reference

The following General Provisions, except as expressly modified elsewhere in this schedule, are incorporated herein by this reference with the same force and effect as if set forth herein in full: Standard Form 32 (6/64 Edition) entitled “General Provisions: Supply Contract” and S and A Form 111 (11/64) entitled “Additional General Provisions, Advertised and Negotiated Fixed-Price Supply Contract.” Copies will be provided on request.

8.3 Indefinite Quantities:

The total quantities specified herein are estimates only. The amounts which the contractor may be required to furnish and the Government to accept hereunder shall be the amounts which shall from time to time be ordered hereunder by the Government during the ordering period of this contract. In any event, however, the Government shall order supplies hereunder having an aggregate value at the unit prices specified herein of not less than $10.00 and the Government shall be entitled to order and the contractor shall be required to furnish supplies hereunder amounting to not more than the total estimated quantities set forth herein. If the Government orders and the Contractor furnishes more than the foregoing maximum amount, the total quantity ordered and furnished shall be treated for all purposes as having been ordered and furnished under the terms of this contract and payment therefor shall be made at the unit contract price or prices.

Sji * * ❖ *

ADDITIONAL GENERAL PROVISIONS, ADVERTISED AND NEGOTIATED EIXED-PRICE SUPPLY CONTRACTS

29. Termmation for Convenience of the Government (Jan.1961)

(a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interests of the Government.

❖ ❖ ❖

(c) After receipt of a Notice of Termination, the Contractor shall submit to the Contracting Officer its termination claim, in the form and with certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than 1 year from the effective date of termination * * *. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such 1-year period or any extension thereof. * * *

(d) * * * [T]he Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid by the Contractor by reason of the total or partial termination of work pursuant to this clause. * * *

‡ $ ❖

(g) The Contractor shall have the right to appeal, under the clause of this contract entitled “Disputes,” from any determination made by the Contracting Officer under paragraph (c) or (e) above. * * *

14 July 1966

ATTACHMENT #16

THE FOLLOWING ALTERATION IS HEREBY MADE IN CLAUSE 29 OP THE ADDITIONAL GENERAL PROVISIONS:.

Delete paragraph (e) of clause 29 and insert the following in lieu thereof:

(e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, the Contracting Officer shall, subject to any Settlement Eeview Board approvals required by Section VIII of the Armed Services Procurement Begulation in effect as of the date of execution of this contract, pay to the Contractor the amounts determined by the Contracting Officer as follows, but without duplication of any amounts agreed upon in accordance with paragraph (d):

(i) for completed supplies accepted by the Government (or sold or acquired as provided in paragraph (b) (vii) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the price or prices specified in the contract, appropriately adjusted for any saving of freight or other charges;

. (ii) the total of—

(A) the costs incurred in the performance of the work terminated, including initial costs and preparatory expense allocable thereto, but exclusive of any costs attributable to supplies paid or to be paid for'under paragraph (e) (i) hereof;

(B) the cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b) (v) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable on account of supplies or materials delivered or services furnished by subcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the costs payable under (A) above; and

(C) a sum, as profit on (A) above, determined by the Contracting Officer pursuant to 8-303 of the Armed Services Procurement Regulation, in effect as of the date of execution of this contract, to be fair and reasonable; provided, however, that if it appears that the Contractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision '(C) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and

(iii) the reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontract thereunder, together with reasonable storage, transportation, and other costs incurred in connection with the protection or disposition of property allo-cable to this contract.

The total sum to be paid to the Contractor under (i) and (ii) of this paragraph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in (e) (i) and (ii) (A) above, the fair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuant to paragraph (b) (vii).

3. (a) There were 14 designated items of cleaning and repair services listed under Lot IV, each with an estimated quantity. The invitation requested unit prices for each item, the unit prices with respect to the first nine items being requested for each of the four zones applicable to the lot.

(b) A company known as Compeco Cleaners bid the lowest overall unit prices for the Lot IV items. Plaintiff was the next lowest bidder with respect to the unit prices for that lot. Plaintiff specified the same unit price for each of the four zones.

4. A separate “Section” of the invitation, which was designated as a “Continuation Sheet,” related to “Deliveries” for the various lots. The requirements for pickup and delivery of tire lots, hereinabove referred to, were described in this section. All of the “Sections” describing the supplies or services to be furnished were listed on page 1 of the Invitation for Bids under the heading “Schedule.”

5. The bid of Compeco Cleaners provided for a minimum order charge of $6 when work items were delivered by Government transportation and $15 for pickup and delivery by the contractor. Because of this stipulation, the bid was considered to be nonresponsive to the invitation and was rejected.

6. The unit prices to be inserted by bidders with respect to the four lots were set forth on pages 2 through 11 of the invitation. The section on “Deliveries” hereinabove referred to was set forth on page 14 of the invitation. On that page plaintiff inserted, in longhand, at the portions describing the delivery services required with respect to Lots III and IY, identical statements, as follows: “Delivery services will not be offered on orders totaling less than $50.”

7. Bids with modifications or qualifications similar to that inserted by plaintiff with respect to “Deliveries” had been accepted by the Norfolk Supply Center for many years. Plaintiff and others had had such contracts in the past with such qualifications which had not been considered disqualifying. In inserting the modification with respect to Lot IY, plaintiff had in mind principally Zone 4, which constituted the areas of Oceana and Dam Neck, Virginia. These areas were approximately twenty miles from Norfolk and plaintiff concluded that dispatching its trucks such distances for pickup and delivery, where only small orders of less than $50 were involved, would be too costly. In the past the practice had been, with respect to such small orders from areas to which the qualification applied, that the Navy itself would collect and deliver them to a central receiving point, fix>m which plaintiff would pick them up and bring them to the plant. Also, the Navy would collect the completed orders at plaintiff’s plant and deliver them to the areas involved. The Dam Neck and Oceana areas historically generated only small orders.

8. (a) Plaintiff, as the next lowest unit price bidder on Lot IV of the invitation, was awarded Contract No. NOO189-67-D0283 on September 22, 1966, the contract covering such lot. The award included the statement: “Your bid on the above numbered Invitation for Bids is hereby accepted as to the items enumerated below with the additions or changes made by you, which additions or changes are set forth in full below.” Set forth below was a list of the 14 items included in Lot IV with the unit prices for each item, set forth for each of the four zones. The estimated amount of the contract services to be furnished was $61,774.44. The award document itself did not set forth the “Delivery” provisions contained on page 14 of the Invitation for Bids, or plaintiff’s qualifying statement with respect thereto. However, the award did state that “This Award consummates the contract which consists of the following documents, including any Continuation Sheets thereto: (a) the Government’s Invitation for Bids and your Bid, (b) the Schedule, (c) the General Provisions, and (d) the Government’s Award. No further contractual document is necessary.”

(b) The contract period was designated as beginning on October 1, 1966, and running through September 30, 1967.

(c) The contracting officer who executed the award was Commander R. A. Weir, the Director of the Purchase Department. Commander Weir did not attend the bid opening. The Navy officials who did attend tabulated the various bids. Bidders were privileged to attend the opening, and plaintiff did attend. After the bids were tabulated by the appropriate Navy officials, the results of the bidding were presented to a Review Board, of which Commander Weir was a member, and the lowest responsible qualifying bidder selected. When it was ultimately determined that plaintiff, as the second lowest bidder on Lot IV, would be awarded that portion of the Invitation as a result of the disqualification of Compeco Cleaners, the award to plaintiff was prepared by duly authorized officials and presented to Commander Weir for signature.

9. On September 30, 1966, Compeco Cleaners sent a telegram to Admiral J. J. Dietz, the Commanding Officer at the Norfolk Naval Supply Center, protesting the award of the contract to plaintiff. The telegram read as follows:

CONCERNING INVITATION TO BID #N00189-67-B0068 SECTION EOUR TOR CLEANING EOUL WEATHER CLOTHING. WE TROTEST AND WILL APPEAL AWARDING OP CONTRACT TO HIGHER BIDDER INSTEAD OP TO US THE LOW BIDDER. CONTRACT OPPICER WEIR SAID WE WERE DISQUALIFIED BECAUSE OUR BID STIPULATED A MINIMUM CHARGE PER ORDER SUCH MINIMUMS WERE ACCEPTED BY NAVY ON CURRENT CONTRACT WHICH WE HOLD AND ALSO ON SEVEN CONTRACTS IN PAST EIGHT YEARS POR SAME SERVICES. IP AWARD IS ALLOWED TO STAND NAVY WILL PAY PIETY TO SEVENTY PER CENT MORE POR SERVICES THAN IP OUR LOW BID WAS ACCEPTED.

10. Plaintiff commenced performance of the contract on October 1, 1966.

11. (a) On October 28,1966, Commander S. S. Stephens, a contracting officer at the Naval Supply Center, sent the following letter to plaintiff:

Contract N00189-67-D0283 is hereby withdrawn because bid submitted in response to IFB N00189-67-B0068 was improper inasmuch as the invitation did not provide for “minimum order” charges. This qualifying statement was incorporated in your bid on page 14 of the Schedule.

(b) There had been no complaints made by defendant to plaintiff concerning any aspect of plaintiff’s performance under the contract.

12. Between October 1, 1966, when the contract period began, and October 28, 1966, when the contract was withdrawn, defendant ordered from plaintiff and paid plaintiff for services totaling $1,025.25.

13. James A. Albano, plaintiff’s president, conferred with Commander Stephens on November 4, 1966. Mr. Albano protested the cancellation of the contract and requested its reinstatement. Commander Stephens stated that an investigation of the award of the contract to plaintiff made after the protest of Compeco Cleaners indicated that the qualification plaintiff had inserted in its bid with respect to deliveries on. orders of less than $50 was not brought to the attention of Commander Weir, the contracting officer who had executed the award of the contract to plaintiff, and that the award to plaintiff was, therefore, the result of an inadvertent error on defendant’s part.

14. On November 11,1966, Mr. Albano sent the following letter to Commander Stephens:

Since our conference last Friday November 4th I have had no word from you regarding our position on above contract.

We have reviewed the matter thoughtfully and discussed same with our attorney. Our position is as follows:

1. That we have a perfectly valid contract. Our proposal was accepted 'and the contract awarded with the qualification stipulated by us.

We quote from the award — “Your bid on above numbered IFB is hereby accepted as to the items enumerated below with the additions or changes made by you — etc.”

2. That the Government cannot terminate such a contract as long as a need for the service exists. We have had at least four calls this week for service.

3. That your interpretation that our clause refers to or establishes a “minimum order” is incorrect. We do not limit or refuse service on account of the size of the order. Our qualification applies only to delivery service, because it simply is not practical to deliver a small bundle to Yorktown or Dam Neck when normally existing transportation by the Navy can usually be arranged.

4. The fact that an administrative error of some type was made prior to our award is not our concern, and we should not be penalized for same.

5. We have incurred considerable costs in time and effort in planning to accommodate this contract, as well as having expended substantial sums of money in preparation for same, all of which was done after the award.

6. We can find no instructions specifically prohibiting qualifying terms or conditions. Paragraph i (d) under Bidding Instructions, refers to a specific item of supply or service other than those for which prices are requested, or a substitute item, and does not even by implication relate to terms and conditions of service as offered by the bidder.

Furthermore, standard procedure of the bidding office in prior years has been to accept bids with terms and conditions offered by the bidder. A review of previous awards will substantiate this.

We ask, therefore, that our contract be reinstated as awarded, since any other action cannot be legally justified. Our alternative would be legal action, which is certainly not our desire. Nevertheless, there is no logical reason why we should accept the financial loss of expenses already incurred or the loss of profit anticipated.

We bid in good faith, the award was made to us, we serviced the contract for one month — we expect you to honor your commitment for the term of the contract.

15. On January 6,1967, Admiral Dietz responded to plaintiff’s letter of November 11,1966, as follows:

This is in reference to your letter of November 11, 1966, in which you have requested reinstatement of Contract N00189-67-D0283 (Lot IV, Zones 1, 2, 3 and 4 of Invitation for Bids N00189-67-B-0068).

As explained in our letter of October 28, 1966, the award of Contract N00189-67-D0283 was made to your firm in error. Invitation for Bids N00189-67-B-0068 requested bids on various items of laundry services, linen rental, dry cleaning, waterproofing and repair services. Compeco Cleaners was the apparent overall low bidder for Lot IV. Compeco’s bid was non-responsive because a qualification was included in the bid indicating a minimum order charge of $6.00 per order when delivered by Government Transportation and $15.00 for pick-up and delivery by the Contractor. However, the terms of the Invitation provided that the Government had the right to order any amount of any item, regardless of minimums, so long as services having an aggregate value of $10.00 were ordered.

Accordingly, the low bid of Compeco Cleaners was rejected as non-responsive and award was made to your firm as being the second low responsive bidder. It was not until after the award was made that it was discovered that you too had qualified your bid by the insertion of (on page 14) the statement “Delivery services will not be offered on orders totalling less than $50.00”. Since the Invitation under Lot IV specifically required pickup and delivery by the Contractor, this qualification of your bid was in direct opposition to the terms of the Invitation and limited the Government’s rights with respect to delivery on orders totalling less than $50.00.

The Armed Services Procurement Kegulation (ASPE 2-404.2d) requires the rejection of a bid which limits the rights of the Government under any proposed contract clause. Since the bid was non-responsive in this respect there existed no legal basis upon which a binding contract could have been entered into with your firm and the improper award was withdrawn.

With respect to your allegation of intended legal action because of financial losses of expenses incurred or the loss of anticipated profit, this is to advise that you are entitled to reimbursement for any cleaning or repair services actually performed, however, the Government has no liability with respect to anticipated profits on orders not placed.

CONCLUSION 0E Law

Upon the foregoing findings of fact, which are made part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover, and judgment is entered to that effect. The amount of recovery will be determined pursuant to Eule 131 (c).

1 By order of February 28, 1969, the court denied defendant’s motion for summary judgment -without prejudice and remanded the case to the trial commissioner for trial.

2 Tie bids and recommendation by tbe pertinent officials concerning who should be awarded the contract were reviewed by a Board of Review, of which the contracting officer was a member.

3 “There can be no doubt that the Government, in the circumstances here, could have immediately terminated plaintiff’s contract for convenience * * *. » * * [T]he Hanson protest caused serious uneasiness among the Government’s procurement officials; in fact, the local Army legal advisers concluded that Hanson had ‘a meritorious position and that he was probably right and we were wrong.’ In this situation, it could clearly be deemed ‘in the best interest of the Government’ (the standard for a convenience-termination) to terminate plaintiff’s contract at once, so as to deflate the existing controversy with Hanson and to avoid a possible rebuke by the General Accounting Office if Hanson took its protest there. The case is thus quite comparable to our prior rulings that it can be considered in the Government’s ‘best interest’ to use the convenience-termination clause to avoid a conflict with the Comptroller General * * * or a dispute with Congress * *

4 Citing John Reiner & Co. v. United States, supra; Brown & Son Electric Co. v. United States, supra; Nesbitt v. United States, 170 Ct. Cl. 666, 345 F.2d 583 (1965), cert. denied, 383 U.S. 926 (1966) ; Coastal Cargo Co. v. United States, supra ; Warren Brothers Roads Co. v. United States, supra; and Schlesinger v. United States, 182 Ct. Cl. 571, 390 F.2d 702 (1968).

Case Details

Case Name: Albano Cleaners, Inc. v. United States

Court Name: United States Court of Claims

Date Published: Feb 18, 1972

Citation: 455 F.2d 556

Docket Number: No. 188-67

Court Abbreviation: Ct. Cl.