B-176111, NOV 7, 1972, 52 COMP GEN 258

B-176111, NOV 7, 1972, 52 COMP GEN 258

BIDS - MISTAKES - EVIDENCE OF ERROR - WITHDRAWAL V. BID CORRECTION REQUIREMENTS UNDER A SALES INVITATION FOR BIDS ON SURPLUS SHIPS, WHICH PROVIDED FOR A BID DEPOSIT EQUAL TO 25 PERCENT OF THE BID, A BIDDER WHO AFTER BID OPENING ALLEGED A BID PRICE INCREASE WAS OVERSTATED BY WESTERN UNION, AND THAT THE EXCESSIVE BID DEPOSIT MADE WAS IN ANTICIPATION OF OFFERING ANOTHER INCREASE, MAY BE PERMITTED TO WITHDRAW ITS BID OR WAIVE THE MISTAKE. THE BIDDER UNABLE TO ESTABLISH BY CLEAR AND CONVINCING EVIDENCE THE EXISTENCE OF A MISTAKE AND THE BID ACTUALLY INTENDED AS REQUIRED BY SECTION 1-2.406- 3 OF THE FEDERAL PROCUREMENT REGULATIONS AND APPLICABLE TO THE SALE PURSUANT TO 40 U.S.C. 474(16), MAY NOT BE PERMITTED TO CORRECT ITS BID, BUT A MISTAKE HAVING BEEN MADE, THE BIDDER MAY BE ALLOWED TO EITHER WITHDRAW THE BID, SINCE THE DEGREE OF PROOF JUSTIFYING WITHDRAWAL IS IN NO WAY COMPARABLE TO THAT NECESSARY FOR BID CORRECTION, OR TO WAIVE THE MISTAKE UNDER THE EXCEPTION TO THE RULE AGAINST WAIVER OF A MISTAKE.

TO THE SECRETARY OF COMMERCE, NOVEMBER 7, 1972:

FURTHER REFERENCE IS MADE TO A LETTER OF JUNE 28, 1972, WITH ENCLOSURES, FROM THE ACTING ASSISTANT SECRETARY FOR MARITIME AFFAIRS, CONCERNING AN ALLEGED MISTAKE IN BID BY LEVIN METALS CORPORATION ON THE USNS CATSKILL (MCS-1), OFFERED BY THE MARITIME ADMINISTRATION (MARAD), UNDER SALES INVITATION NO. PD-X-934.

THE SUBJECT INVITATION WAS ISSUED ON MARCH 29, 1972, INVITING SEALED BIDS ON 16 SURPLUS SHIPS FOR NONTRANSPORTATION USE OR FOR SCRAPPING. ARTICLE V OF THE INVITATION REQUIRED BIDS TO BE ACCOMPANIED BY A BID DEPOSIT EQUAL TO 25 PERCENT OF THE BID. BID OPENING WAS SCHEDULED FOR 2:30 P.M., E.S.T., APRIL 27, 1972, IN WASHINGTON, D.C. LEVIN'S BID WAS RECEIVED BY MARAD PRIOR TO THE 27TH. ON THE MORNING OF THE 27TH, LEVIN CONTACTED THE CONTRACTING OFFICER IN WASHINGTON AND ARRANGED TO POST AN ADDITIONAL BID DEPOSIT WITH MARAD'S SAN FRANCISCO OFFICE TO COVER A LAST-MINUTE TELEGRAPHIC INCREASE IN ITS BID. A CASHIER'S CHECK REPRESENTING THE ADDITIONAL BID DEPOSIT WAS POSTED WITH THAT OFFICE PRIOR TO BID OPENING. ALSO, ON THE MORNING OF THE 27TH, THE CONTRACTING OFFICER RECEIVED A TELEGRAM FROM LEVIN WHICH READS, IN PERTINENT PART, AS FOLLOWS:

LEVIN METALS CORPORATION HEREBY MODIFIES BID PREVIOUSLY SUBMITTED WITH BID BOND NUMBER 139754 BID NO. PD-X-934 OPENING APRIL 27 2:30 P.M. E.S.T. AS FOLLOWS. USNS CATSKILL/MSC-1/WE INCREASE BID BY $133,586.00 ADDITIONAL BID DEPOSITS HAS BEEN PROVIDED.

RICHARD LEVIN PRESIDENT LEVIN METALS CORP. COLL 27 2:30 PM 139754 PD X- 934 27 $133,586.00.

BIDS WERE OPENED AS SCHEDULED AND LEVIN BID $70,000 ON THE CAT-SKILL AND $1.00 ON THE SS HESPERIA. ACCOMPANYING ITS BID WAS A BID BOND IN THE AMOUNT OF $37,500. IN VIEW OF THE TELEGRAPHIC MODIFICATION, THE CONTRACTING OFFICER COMPUTED LEVIN'S BID ON THE CATSKILL AT $203,586, AND NOTED THAT ITS BID BOND OF $52,500($37,500 PLUS $15,000) WOULD COVER A BID OF UP TO $210,000. AFTER BEING NOTIFIED THAT IT WAS THE HIGH BIDDER, LEVIN CLAIMED THAT ITS BID WAS MISTAKENLY INCREASED BY $133,586, WHEN THE INCREASE INTENDED WAS $33,586, AND SUBMITTED CERTAIN EVIDENCE TO PROVE ITS CLAIM.

THE CONTRACTING OFFICER CONCLUDED THAT LEVIN'S BID COULD NOT BE CORRECTED TO REFLECT A PRICE OF $103,586, AS LEVIN HAD NOT ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE THE EXISTENCE OF A MISTAKE AND THE INTENDED BID PRICE AS PROVIDED BY SECTION 1-2.406-3 OF THE FEDERAL PROCUREMENT REGULATIONS. THE CONTRACTING OFFICER'S DECISION WAS BASED PRIMARILY UPON THE REASONING THAT HAD LEVIN INTENDED AN INCREASE OF ONLY $33,586, IT WOULD NOT HAVE INCREASED ITS BID BOND DEPOSIT BY AN AMOUNT SUFFICIENT TO COVER A BID UP TO $210,000, PARTICULARLY SINCE IT HAD SUBMITTED WITH ITS BID A BOND MORE THAN SUFFICIENT TO EQUAL 25 PERCENT OF THE BID INCREASED BY $33,586. THEREFORE, LEVIN WAS ADVISED BY LETTER DATED MAY 19, 1972, OF ACCEPTANCE OF ITS BID IN THE AMOUNT OF $203,586, FOR PURCHASE OF THE CATSKILL.

LEVIN REQUESTS THAT THE CONTRACT BE REFORMED TO REFLECT A PRICE OF $103,586. TO SUPPORT ITS REQUEST, LEVIN CONTENDS THAT THE EVIDENCE OF MISTAKE SUBMITTED TO THE CONTRACTING OFFICER WAS CLEAR AND CONVINCING AND SATISFACTORILY EXPLAINED THE REASON FOR INCREASING THE BID BOND. THE EVIDENCE SUBMITTED TO THE CONTRACTING OFFICER CONSISTED OF AFFIDAVITS OF MR. LEVIN AND THREE EMPLOYEES, ITS WORKSHEET, AND A LETTER DATED MAY 15, 1972, FROM WESTERN UNION. THE AFFIDAVITS ARE TO THE EFFECT THAT ON APRIL 26, 1972, MR. LEVIN INSTRUCTED HIS SECRETARY TO SEND IN A BID MODIFICATION OF $33,586; THAT THE SECRETARY PHONED IN A MESSAGE TO THIS EFFECT TO WESTERN UNION; THAT THE WESTERN UNION CLERK REPEATED THE MESSAGE, INCLUDING THE $33,586 FIGURE; AND THAT COGNIZANT PERSONNEL OF LEVIN IMMEDIATELY CLAIMED MISTAKE UPON HEARING THAT ITS BID WAS $203,586. IT IS EXPLAINED THAT THE BID BOND WAS INCREASED IN THE EVENT MR. LEVIN DECIDED AT THE LAST MINUTE TO INCREASE THE BID PRICE ON THE HESPERIA AND MAKE IT AN "ALL OR NONE BID." IN THIS CONNECTION, ONE OF THE EMPLOYEES STATES THAT HE WAS TOLD TO INCREASE THE BID BOND TO COVER $200,000 FOR THIS PURPOSE, BUT INCREASED IT TO COVER $210,000, IN CASE MR. LEVIN WANTED TO BID ABOVE THE FORMER FIGURE. HOWEVER, IT IS REPORTED THAT THE BID ON THE HESPERIA WAS NOT INCREASED BECAUSE OF THE SHORTNESS OF TIME. THE PERTINENT PARAGRAPH FROM THE WESTERN UNION LETTER IS AS FOLLOWS:

THE SEVENTH WORD FROM THE END OF THE TEXT WAS ACCEPTED AND RECORDED BY OUR OPERATOR AS $133.586.00 AND WHILE WE HAVE NO RECORDS OF ANY PROBLEMS WITH THIS PARTICULAR MESSAGE, WE CANNOT SAY WITH CERTAINTY WHAT HAPPENED IN THIS CASE. OUR OPERATOR BELIEVES HE HEARD THE FIGURE AS $133,586.00. IN DEALING WITH PEOPLE AND MACHINES IT IS NOT IMPOSSIBLE THAT AN ERROR COULD OCCUR IN THE DICTATION AND/OR TRANSCRIPTION OF THE MESSAGE BY TELEPHONE.

IN ADDITION TO THE FOREGOING, LEVIN HAS FURNISHED A CHART COMPARING THE SALE PRICE AND PHYSICAL CHARACTERISTICS, PARTICULARLY LIGHT DISPLACEMENT TONNAGE, OF OTHER SURPLUS SHIPS WITH THE CATSKILL TO SUPPORT ITS CONTENTION THAT THE INTENDED BID WAS $103,586. LEVIN ALSO POINTS OUT THAT THE SECOND AND THIRD HIGH BIDS ON THE CATSKILL WERE $80,290 AND $74,312. FURTHERMORE, LEVIN TAKES ISSUE WITH MARAD'S STATEMENT THAT BECAUSE THE CATSKILL WAS A MILITARY SHIP IT HAS VALUABLE PIECES OF EQUIPMENT WHICH CAN BE SALVAGED AND RESOLD AND, THEREFORE, IS WORTH MORE THAN THE OTHER SHIPS COMPARED.

THE CONTRACTING OFFICER STATES THAT SINCE LEVIN'S TELEGRAPHIC MODIFICATION WAS DISPATCHED AT 5:35 P.M., P.S.T., APRIL 26, 1972, TO ARRIVE BEFORE 2:30 P.M., E.S.T., APRIL 27, 1972, IT IS UNREASONABLE TO CONCLUDE THAT A FURTHER MODIFICATION WAS CONTEMPLATED THE FOLLOWING MORNING IN VIEW OF THE 3 HOUR TIME DIFFERENTIAL. FURTHERMORE, HE POINTS OUT THAT IF THE INTENDED INCREASE IN THE BID ON THE CATSKILL WAS ONLY $33,586, THE INCREASED BID DEPOSIT WOULD HAVE ALLOWED A LATITUDE OF OVER $100,000 TO BID ON THE HESPERIA, A LIBERTY CLASS SHIP WHOSE CURRENT SCRAP VALUE IS WELL FIXED AT APPROXIMATELY $40,000. THEREFORE, HE CONCLUDED THAT THE LAST MINUTE INCREASE IN THE BID DEPOSIT WAS TO COVER THE LAST MINUTE $133,586 INCREASE IN THE CATSKILL BID. HE ALSO POINTS OUT THAT ALTHOUGH THE WESTERN UNION MANAGER STATED THAT "IT IS NOT IMPOSSIBLE" FOR AN ERROR TO OCCUR, HE ALSO STATED THAT "OUR OPERATOR BELIEVES HE HEARD THE FIGURE AS $133,586." HE ALSO POINTS OUT THAT THE TELEGRAM MODIFYING THE BID ON THE CATSKILL REFERS TO THE POSTING OF THE ADDITIONAL BID DEPOSIT, INDICATING THAT IT WAS NEEDED TO MEET THE 25 PERCENT REQUIREMENT BECAUSE OF THE AMOUNT OF THE INCREASED BID. IN VIEW OF THESE CIRCUMSTANCES, HE GAVE LESS WEIGHT TO THE AFFIDAVITS AND UNVERIFIED WORKSHEET THAN HE WOULD HAVE OTHERWISE ACCORDED THEM AND CONCLUDED THAT THERE WAS NOT CLEAR AND CONVINCING EVIDENCE OF A MISTAKE.

THE GENERAL RULE IS THAT ACCEPTANCE OF A BID WITH KNOWLEDGE OF A MISTAKE THEREIN DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT. 36 COMP. GEN. 441, 444(1956). WHERE, AS HERE, A MISTAKE IN BID IS ALLEGED AFTER BID OPENING BUT BEFORE AWARD, THE CITED REGULATION (FPR 1-2.406 3(A)(1), (2), AND (3)) PROVIDES AS FOLLOWS:

SEC. 1-2.406-3 OTHER MISTAKES - DISCLOSED BEFORE AWARD.

(1) A DETERMINATION MAY BE MADE PERMITTING THE BIDDER TO WITHDRAW HIS BID WHERE THE BIDDER REQUESTS PERMISSION TO DO SO AND CLEAR AND CONVINCING EVIDENCE ESTABLISHES THE EXISTENCE OF A MISTAKE. HOWEVER, IF THE EVIDENCE IS CLEAR AND CONVINCING BOTH AS TO THE EXISTENCE OF A MISTAKE AND AS TO THE BID ACTUALLY INTENDED, AND IF THE BID, BOTH AS UNCORRECTED AND CORRECTED, IS THE LOWEST RECEIVED, A DETERMINATION MAY BE MADE TO CORRECT THE BID AND NOT PERMIT ITS WITHDRAWAL.

(2) A DETERMINATION MAY BE MADE PERMITTING THE BIDDER TO CORRECT HIS BID WHERE THE BIDDER REQUESTS PERMISSION TO DO SO AND CLEAR AND CONVINCING EVIDENCE ESTABLISHES BOTH THE EXISTENCE OF A MISTAKE AND THE BID ACTUALLY INTENDED. HOWEVER, IF SUCH CORRECTION WOULD RESULT IN DISPLACING ONE OR MORE LOWER ACCEPTABLE BIDS, THE DETERMINATION SHALL NOT BE MADE UNLESS THE EXISTENCE OF THE MISTAKE AND THE BID ACTUALLY INTENDED ARE ASCERTAINABLE SUBSTANTIALLY FROM THE INVITATION AND BID ITSELF. IF THE EVIDENCE IS CLEAR AND CONVINCING ONLY AS TO THE MISTAKE, BUT NOT AS TO THE INTENDED BID, A DETERMINATION PERMITTING THE BIDDER TO WITHDRAW HIS BID MAY BE MADE.

(3) IF THE EVIDENCE DOES NOT WARRANT A DETERMINATION UNDER SUBPARAGRAPH (1) OR (2) OF THIS PARAGRAPH, A DETERMINATION MAY BE MADE THAT A BIDDER MAY NEITHER WITHDRAW NOR CORRECT HIS BID.***.

ALTHOUGH THE REGULATION IS SPECIFICALLY APPLICABLE TO THE PROCUREMENT OF SUPPLIES OR SERVICES BY THE GOVERNMENT, THE REGULATION WAS APPLIED BY MARAD IN THIS CASE PURSUANT TO THE AUTHORITY OF 40 U.S.C. 474(16). THE GENERAL SERVICES ADMINISTRATION REGULATION APPLICABLE TO SALES IS TO THE SAME EFFECT. SEE FEDERAL PROPERTY MANAGEMENT REGULATION 101 45.803.

THE REGULATION PERMITS CORRECTION OF A BID ONLY WHERE THERE IS "CLEAR AND CONVINCING EVIDENCE" OF BOTH THE EXISTENCE OF A MISTAKE AND AS TO THE BID ACTUALLY INTENDED. IN THE INSTANT CASE, THE CONTRACTING OFFICER FOUND THAT THERE WAS NOT CLEAR AND CONVINCING EVIDENCE AS TO EITHER THE MISTAKE OR THE BID INTENDED. SINCE WE AGREE WITH THE CONTRACTING OFFICER'S CONCLUSION THAT THE EVIDENCE SUBMITTED BY LEVIN DID NOT CLEARLY AND CONVINCINGLY ESTABLISH WHETHER IT INTENDED TO BID $103,586, OR $203,586, WE HAVE NO DISAGREEMENT WITH HIS DETERMINATION REFUSING TO PERMIT CORRECTION OF THE BID. HOWEVER, WE DO NOT AGREE WITH HIS CONCLUSION CONCERNING WITHDRAWAL. WHILE THE REGULATION PERMITTING WITHDRAWAL OF A BID BASED UPON A MISTAKE ALSO REQUIRES THE ESTABLISHMENT THEREOF BY "CLEAR AND CONVINCING EVIDENCE," WE HAVE HELD THAT THE DEGREE OF PROOF REQUIRED IS IN NO WAY COMPARABLE TO THAT NECESSARY TO ALLOW CORRECTION. SEE 36 COMP. GEN. 441, 444(1956), WHEREIN WE STATED:

*** IN UNDERTAKING TO BIND A BIDDER BY ACCEPTANCE OF A BID AFTER NOTICE OF A CLAIM OF ERROR BY THE BIDDER, THE GOVERNMENT VIRTUALLY UNDERTAKES THE BURDEN OF PROVING EITHER THAT THERE WAS NO ERROR OR THAT THE BIDDER'S CLAIM WAS NOT MADE IN GOOD FAITH. THE DEGREE OF PROOF REQUIRED TO JUSTIFY WITHDRAWAL OF A BID BEFORE AWARD IS IN NO WAY COMPARABLE TO THAT NECESSARY TO ALLOW CORRECTION OF AN ERRONEOUS BID.

ALSO SEE RUGGIERO V. UNITED STATES, 420 F. 24 709(1970), 190 CT. CL. 327.

APPLYING THE FOREGOING PRINCIPLE TO THE INSTANT CASE, WE BELIEVE THAT THE EVIDENCE SUBMITTED PRIOR TO THE AWARD MUST BE CONSIDERED AS REASONABLY INDICATING THAT A MISTAKE WAS MADE. WHILE CONCEDEDLY SUCH EVIDENCE AS EMPLOYEE AFFIDAVITS AND AN UNVERIFIED WORKSHEET ARE SELF SERVING AND MAY NOT ALONE BE CONSIDERED SUFFICIENT TO PERMIT CORRECTION, AS IN THIS CASE, WE BELIEVE THAT IN THE ABSENCE OF EVIDENCE TO THE CONTRARY IT IS SUFFICIENT TO PERMIT WITHDRAWAL. IN THESE CIRCUMSTANCES, IT IS OUR VIEW THAT WITHDRAWAL SHOULD HAVE BEEN PERMITTED, AND THAT THE AWARD AS MADE LEGALLY COULD NOT BE ENFORCED.

IN ANTICIPATION OF SUCH A CONCLUSION, LEVIN ADVISED US IN A LETTER DATED OCTOBER 5, 1972, IN PERTINENT PART, AS FOLLOWS:

1. BASICALLY, WE HAVE ALLEGED AND IN OUR OPINION, PROVEN THAT A MISTAKE WAS MADE.

IN OUR OPINION G.A.O., AS AN APPEAL BOARD, MUST RULE WHETHER WE ARE RIGHT OR WRONG AND AWARD THE SHIP ACCORDINGLY.

2. PROCEDURAL REQUIREMENTS AND CHANGES IN PERSONNEL HAVE CAUSED THIS APPEAL TO TAKE FAR LONGER THAN ANTICIPATED, RESULTING IN UNDUE HARDSHIP FOR OUR COMPANY SHOULD REBIDDING PROVE NECESSARY. NEITHER MARAD OR LEVIN METALS FEEL BID WITHDRAWAL IS AN ACCEPTABLE SOLUTION.

NORMALLY, WE MUST HOLD THAT WHERE A BIDDER ALLEGES A MISTAKE AFTER BID OPENING, HE IS NOT THEN FREE TO DECIDE TO WAIVE HIS RIGHT TO HAVE THE BID REJECTED BECAUSE OF MISTAKE. TO PERMIT A BIDDER TO DO SO WOULD BE "TANTAMOUNT TO ALLOWING THE OSTENSIBLE LOW BIDDER TO ELECT, AFTER BID OPENING, WHETHER TO STAND ON THE BID, OR WITHDRAW IT, ***DEPENDING UPON WHICH COURSE OF ACTION APPEARED TO BE IN ITS BEST INTERESTS." 37 COMP. GEN. 579, 582(1958). HOWEVER, WE HAVE PERMITTED AN EXCEPTION TO THE RULE AGAINST WAIVER OF MISTAKE, IF IT IS CLEAR THAT THE BIDDER WOULD HAVE BEEN LOWEST (IN A PROCUREMENT), ABSENT THE MISTAKE, EVEN THOUGH THE AMOUNT OF THE INTENDED BID COULD NOT BE CLEARLY PROVEN FOR THE PURPOSE OF BID CORRECTION. 42 COMP. GEN. 723, 725(1963); ALSO B 168673, APRIL 7, 1970. WE THINK THE EXCEPTION CAN BE APPLIED IN THIS CASE SINCE LEVIN'S BID AS CORRECTED OR UNCORRECTED WOULD BE HIGH.

ACCORDINGLY, WE BELIEVE LEVIN SHOULD BE PERMITTED TO EITHER WITHDRAW ITS BID OR WAIVE ITS ALLEGED MISTAKE.