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Thursday, July 3, 2014

Distinguishing bid defects from bidder instructions

This post concerns a recent decision by the Guam Public Auditor. I'll start with a rendition of the Decision (bearing in mind I selectively cut, paste, rearrange, paraphrase, etc., so read the Decision at the link to get the true version).

In the Appeal of J&B Modern Tech, OPA-PA-14-001.
J&B asserts in this appeal that JRN's failure to attend a December 10, 2013 site inspection of Southern High School rendered JRN a nomesponsive bidder who should have been disqualified from consideration of the IFB award. J&B asserts that it should be awarded the bid.

John Leon Guerrero of GDOE Facilities and Maintenance requested a cost proposal from JRN for duct work to be performed at Simon Sanchez High School, Southern High School, and Upi Elementary School. To prepare the requested cost proposal, JRN personnel conducted site inspections. Upon completing the site inspections at the three schools, JRN's Project Engineer informed Mr. Leon Guerrero that the scope of work for which the cost proposal was requested amounted to more than $100,000.00 and should be opened for bids.

GDOE issued GDOE IFB 005-2014. The IFB sought proposals for the furnishing and installation of Air Conditioning Exterior Duct System for four high schools.

The IFB stated that "The Contractor must conduct pre site inspections to determine existing conditions and any special needs/requirements for execution of the project. Site inspection and field verification of existing layout is mandatorv." The GDOE Supply Management Adminsitrator issued Amendment No. 1 advising bidders that a pre-bid co╬╝ference and site inspection would take place on December 6, 2013. The site inspection got to three of the four schools on that date, but the inspection of the 4th school was postponed. A JRN representative was present for the inspection on December 6 inspection, but did not attend the postponed inspection of the 4th school.

J&B and JRN submitted their bids on December 17. JRN's bid was about $95,000 lower than J&B's. Given the price discrepancy, GDOE confirmed (via email) with Dan Gomez of JRN that JRN conducted a site inspection of Southern High School prior to December 6, 2013, that JRN understood the scope of work at Southern High School, and that JRN confirmed its bid price. On February 5, 2014, GDOE issued a Bid Status notification to J&B stating that J&B was not selected due to higher price offered.

J&B filed its Protest to GDOE asserting that JRN's failure to attend the mandatory site inspection of Southern High School on December 10, 2013 rendered JRN's bid nonresponsive and disqualified from consideration for award.

JRN did conduct a pre site inspection of Southern High School to determine existing conditions and any special needs/requirements for execution of the project, albeit before the IFB was issued. Consistent with the IFB requirements, JRN assumed full responsibility to ensure that all proposed equipment meet or exceed existing quality and specifications, i.e., material specifications, dimensions, configuration, mechanical requirements, mounting and installation requirements, etc.

The manner and timing in which JRN conducted its site inspection of Southern High School did not prejudice J&B and is a minor informality which GDOE could and apparently did waive. Minor informalities are mistakes found in bids after opening but prior to award and are matters of form rather than substance that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible. (2 GAR § 3109(m)(4)(B).)

Irrespective of whether or not GDOE determined that JRN's pre-IFB issuance site inspection of Southern High School was a minor informality which was waived or not, the Public Auditor concludes that GDOE's determination, that the site inspections while deemed "mandatory" were not deemed conditions precedent for "responsiveness" of bids, was not in error. A "responsive bidder" is a person who submitted a bid which conforms in all material respects to the Invitation for Bids. 5 G.C.A. § 520 l(g). RN's bid was responsive to the requirements of the IFB.
A quick read of the Decision, with its focus on waiver of mistakes, might lead to the conclusion that this was the basis of the Decision. But it was not, and should not have been.  The decision did not find a minor informality in J&B's bid; it found that the bid was responsive.

The failure to attend a "mandatory" pre-bid conference and site inspection was not a mistaken element of JRN's bid.  Attendance was a procedural instruction to bidders to assure that all bidders were properly informed of the nature of the work, its scope, and what would be required of bidders to complete the installation of the duct work.

As the decision implied, the fault alleged in the bid process here was not material; it was not a condition precedent to being qualified to bid.  JRN's bid was responsive because it conformed in all material respects to the IFB.

The reference in the Decision to waiver of a minor mistake is a reference to a bid mistake, not a procedural requirement for consideration of a bid submission. The reference is to the regulation dealing with "Mistakes in Bids". (2 GAR § 3109(m).)  The regulation's subparts describe variously the consequences of mistakes in bids in general, mistakes made or discovered before bid opening, mistakes after opening but before award, and those after award. The waiver of a "minor informality" is in the subpart dealing with mistakes in a bid found after opening but before award. (§ 3109(m)(4)(B)).)

The decision discussed the nature of minor informalities, and then found that the bid was responsive.  It described both: a minor informality is one that is negligible therefore does not prejudice other bidders in terms of , and a responsive bid is one that is material in all respects.  Connecting the dots, the decision implies that, when analyzing responsiveness (which must conform in all material respects), an immaterial matter is one that does not prejudice other bidders because it does not affect price, quantity, quality, delivery, or contractual conditions.  (And note, "contractual" conditions are ones that are part of the ultimate awarded contract, not conditions of submitting a bid.)

The regulation on mistakes in bids actually refers to two distinct kinds of mistakes collectively called a "minor informality"; one mistake is a "matter of form", and the other is called an "insignificant mistake". "Minor informalities are matters of form, rather than substance evident from the bid document". On the other hand, "insignificant mistakes" are those mistakes "that can be waived or corrected without prejudice to other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible."  This mistake is insignificant because, whatever its nature (even if it is denominated a "mandatory" requirement), the  failure does not cause prejudice to other bidders.

Thus, waivable insignificant mistakes go beyond mere matters of form. "Examples include the failure of a bidder to: (1) return the number of signed bids required by the Invitation for Bids; (2) sign the bid, but only if the unsigned bid is accompanied by other material indicating the bidder's intent to be bound; or (3) acknowledge receipt of an amendment to the Invitation for Bids; but only if: (i) it is clear from the bid that the bidder received the amendment and intended to be bound by its terms; or (ii) the amendment involved had a negligible effect on price, quantity, quality, or delivery."

The significant feature of this rule is that mistakes that do not prejudice other bidders can, and should if the state is not prejudiced, be waived. Further, the provision is significant because it describes what is meant by "prejudice other bidders".  

Finally, it becomes significant because it also bears on the question whether a nonconforming aspect in an IFB might be considered immaterial and therefore not rise to the level of a nonresponsive.  As the cases hold, not all nonconforming bids are nonresponsive.  Only a material nonconforming bid is nonresponsive.

An error by a bidder or in a bid does not prejudice other bidders if "the effect on price, quantity, quality, delivery, or contractual conditions is negligible." Failure to attend a site inspection does not prejudice or disadvantage another attending bidder, but it could certainly disadvantage the bidder who fails to attend. That is no concern of other bidders.

This is expressly allowed by Guam procurement law. "Correction or withdrawal of inadvertently erroneous bids before or after award ... shall be permitted in accordance with regulations.... After bid opening, no changes in bid prices or other provisions of bids prejudicial to the interest of the Territory or fair competition shall be permitted." (5 GCA § 5211(f).)

Although there is no specific law on Guam dealing with abnormally low bids, it is the usual case around the world that they are to be questioned (see, The price is not always right). The discrepancy in price here (nearly 25% lower than the other bidder) obviously raised that question, and GDOE is to be commended for confirming with the low bidder that it understood the scope of work and confirmed its bid price.

This case can stand for the proposition that not all matters in an IFB which are declared to be mandatory are material or prejudicial, and can be overlooked, or "waived". 

Where, as here, other bidders were not prejudiced by a waiver of a bid requirement ("that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible"), and the territory's concern to get a price that understood the requirements and risks are met (the fourth school had, in fact, been recently inspected for the very factors pertinent to the bid), even a so-called mandatory bid requirement is not really mandatory at all.




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