Wednesday, March 21, 2012

Offers vs. Quotations

A recent bid protest decision handed down by the Government Accountability Office (GAO) illustrates the legal differences between an "offer" and a "quotation" (see B-405711.2 dated March 19, 2012). An offer, when accepted by the Government, is immediately binding on both parties whereas a quotation is not binding until accepted by the contractor. In this case, the Navy issued an RFQ (Request for Quotation) to buy some shipping containers. There were several bidders. One of the unsuccessful bidders protested the award because the Navy had not properly evaluated its offer.

In its defense, the Navy took the position that the appellant was not an "interested party" because its quotation had expired. The Navy was hanging its hat on a technicality the quotation failed to specify that its price would be held firm for 90 days as requested by the RFQ. GAO disagreed because the solicitation document was an RFQ, not an RFP.

We do not agree with the agency that the "expiration" of (the) quotation rendered the quotation unacceptable. We recognize that, in practice, agencies and vendors often treat quotations as if they were offers. Nonetheless, as a matter of law, quotations are different from bids or offers.

The submission of a bid or proposal constitutes, by its very nature, an offer by a contractor that, if accepted, creates a binding legal obligation n both parties. Because of the binding nature of bids and offers, they are held open for acceptance within a specified or reasonable period of time, and our case law has necessarily developed rules regarding the government's acceptance of "expired" bids or proposals.

A quotation, on the other hand, is not a submission for acceptance by the government to form a binding contract; rather, vendor quotations are purely informational. In the RFQ context, it is the government that makes the offer, albeit generally based on the information provided by the vendor in its quotation, and no binding agreement is created until the vendor accepts the offer. A vendor submitting a price quotation therefore could, the next moment, reject an offer from the government at its quoted price. Because endors in the RFQ context hold the power of acceptance and their submissions are purely informational, there is nothing for vendors to hold open. Thus, we have not applied the acceptance period concept or the attendant rules regarding expiration of bids or offers to RFQs.

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