B-177432, DEC 21, 1972

B-177432, DEC 21, 1972

CONTRACT - RELIEF FROM UNILATERAL MISTAKE - LACK OF NOTICE - RECISSION IN GOVERNMENT INTEREST DECISION AS TO WHETHER FLORIDA MACHINE & FOUNDRY CO. MAY BE RELIEVED OF ITS PERFORMANCE OBLIGATIONS UNDER A CONTRACT FOR TWO ALLOY CAST IRON PUMP LINERS AWARDED BY THE ARMY ENGINEERING DISTRICT, BUFFALO, N.Y. THE COMP. GEN. AGREES THAT THE CONTRACTING OFFICER SHOULD NOT HAVE BEEN ON CONSTRUCTIVE NOTICE OF A PRICING ERROR IN FLORIDA'S BID BECAUSE OF THE LARGE DIFFERENCES BETWEEN EACH OF THE FOUR BIDS RECEIVED. THUS, RELIEF WILL NOT BE GRANTED FROM THE UNILATERAL MISTAKE SINCE THERE WAS NO NEED FOR THE CONTRACTING OFFICER TO VERIFY THE CONTRACTOR'S BID PRICE. WENDER PRESSES, INC. V. UNITED STATES, 56 F. SUPP. 505. ALSO, SINCE THE MISTAKE WAS NOT GREAT, THE UNCONSCIONABILITY DOCTRINE DOES NOT APPLY. HOWEVER, THE COMP. GEN. DOES NOT OBJECT TO RESCINDING FLORIDA'S CONTRACT SINCE THE ADDITION OF THE ERRONEOUS PRICE WOULD DISPLACE FLORIDA AS LOW BIDDER AND RECISSION IS THEREFORE IN THE GOVERNMENT'S BEST INTEREST.

TO MR. SECRETARY:

THIS IS IN REPLY TO A LETTER DATED NOVEMBER 9, 1972, AND ENCLOSURES, REFERENCE DAEN-GCN, FROM THE DEPUTY GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, REQUESTING A DECISION AS TO WHETHER FLORIDA MACHINE & FOUNDRY COMPANY (FLORIDA) MAY BE RELIEVED OF ITS OBLIGATIONS UNDER CONTRACT NO. DACW49-73-C-0022, AWARDED PURSUANT TO FORMAL ADVERTISING PROCEDURES BY THE U.S. ARMY ENGINEER DISTRICT, BUFFALO, NEW YORK.

THE INVITATION REQUESTED BIDS FOR FURNISHING TWO ALLOY CAST IRON PUMP LINERS, AND WAS SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS. THE FOUR BIDS RECEIVED WERE AS FOLLOWS:

BIDDER QUANTITY UNIT PRICE TOTAL BID

PETTIBONE CORPORATION 2 $1,430.00 $2,860.00

FLORIDA MACHINE & FOUNDRY CO. 2 2,270.00 4,541.40

AMSCO DIVISION, ABEX CORP. 2 2,859.56 5,719.12

THOMAS FOUNDRIES, INC. 2 4,620.00 9,240.00

THE RECORD SHOWS THAT THE LOW AND THIRD-LOW BIDDERS WERE DISQUALIFIED AS NONRESPONSIVE, SINCE NEITHER WAS A SMALL BUSINESS CONCERN. AWARD WAS THEREFORE MADE ON SEPTEMBER 12, 1972, TO FLORIDA AS THE LOWEST RESPONSIVE BIDDER.

BY LETTER OF SEPTEMBER 20, 1972, FLORIDA ACKNOWLEDGED RECEIPT OF THE CONTRACT BUT ALLEGED A MISTAKE IN ITS BID AND REQUESTED PERMISSION TO WITHDRAW FROM ITS CONTRACT. PURSUANT TO THE CONTRACTING OFFICER'S REQUEST, FLORIDA SUBMITTED ITS WORK-PAPERS, AND ASSERTED THAT IT NEGLECTED TO INCLUDE IN ITS BID THE VALUE OF THE CASTING, FREIGHT AND CRATING ($1,682.70). THE LETTER FURTHER STATES THAT THE BID PRICE SHOULD HAVE BEEN $3,953.40 FOR EACH UNIT RATHER THAN THE ERRONEOUS PRICE BID OF $2,270.70. IT IS NOTED THAT A DETAILED GOVERNMENT ESTIMATE WAS NOT PREPARED BUT THAT AN INFORMAL ESTIMATE OF $1,550 FOR EACH PUMP LINER WAS ARRIVED AT BASED ON PREVIOUS PROCUREMENT COSTS OF $1,226 EACH IN 1963 AND 1966. WHILE THE CONTRACTING OFFICER HAS ADVISED THAT IN HIS OPINION THE COST OF THE CASTING ($1,518.70 EACH) WAS OBVIOUSLY OMITTED FROM THE BID PRICE, HE DOES NOT BELIEVE THAT THE MISTAKE WAS ONE WHICH DID OR SHOULD HAVE PLACED HIM ON NOTICE OF THE ERROR PRIOR TO AWARD. HOWEVER, YOUR DEPUTY GENERAL COUNSEL HAS EXPRESSED THE OPINION THAT IT WOULD BE UNCONSCIONABLE TO DENY RESCISSION SINCE FLORIDA'S MISTAKE IS EQUAL TO 74 PERCENT OF ITS BID PRICE.

THE GENERAL RULE IS THAT RELIEF WILL NOT BE GRANTED IN THE CASE OF A CONTRACTOR'S UNILATERAL MISTAKE AFTER THE BID OR OFFER HAS BEEN ACCEPTED BY THE GOVERNMENT UNLESS THE CIRCUMSTANCES ARE SUCH THAT THE GOVERNMENT WAS OR SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF MISTAKE, THUS NECESSITATING VERIFICATION BEFORE ACCEPTANCE OF THE BID OR OFFER. WENDER PRESSES, INC. V. UNITED STATES, 170 CT. CL. 483, 343 F.2D 1961 (1965); SALIGMAN ET AL. V. UNITED STATES, 56 F. SUPP. 505 (1944); AND 45 COMP. GEN. 305 (1965). HOWEVER, RELIEF HAS BEEN ALLOWED AFTER AWARD WHEN A MISTAKE IS SO GREAT THAT IT COULD BE SAID THE GOVERNMENT WAS OBVIOUSLY GETTING SOMETHING FOR NOTHING. SEE KEMP V. UNITED STATES, 38 F. SUPP. 568 (1941), IN WHICH THE LOW BID WAS LESS THAN ONE THIRD OF THE NEXT TWO HIGHER BIDS. ALSO, WE HAVE AUTHORIZED RELIEF, AFTER VERIFICATION, WHERE THE MISTAKE WAS SO GREAT THAT IT WAS CONSIDERED UNCONSCIONABLE (OR INEQUITABLE) TO HOLD THE FIRM TO ITS CONTRACT. B-150382, FEBRUARY 20, 1963; B-170691, JANUARY 28, 1971.

IN THE INSTANT CASE WE DO NOT FIND A SUFFICIENT BASIS FOR CONCLUDING THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF AN ERROR IN FLORIDA'S BID. IN OUR OPINION, THE LARGE DIFFERENCES BETWEEN EACH OF THE FOUR BIDS RECEIVED DID NOT INDICATE A POSSIBLE MISTAKE IN FLORIDA'S BID, PARTICULARLY SINCE FLORIDA'S BID WAS NOT LOW AND SINCE THE GOVERNMENT'S ESTIMATE WAS IN LINE WITH THE LOWEST BID RECEIVED. WHILE WE HAVE NOTED THAT THE BIDS OF THE LOW AND THIRD-LOW BIDDERS (LARGE BUSINESS CONCERNS) WERE NONRESPONSIVE, WE CONSIDER THOSE BIDS TO BE RELEVANT TO THE DETERMINATION OF WHAT CONSTITUTES A REASONABLE PRICE (AS WELL AS FOR PLACING THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF ERROR) SINCE IT IS NOT INDICATED IN THIS CASE THAT THE NONRESPONSIVENESS OF THE LARGE BUSINESS BIDS AFFECTED THE BID PRICES. SEE B-173015, AUGUST 18, 1971.

WITH RESPECT TO YOUR COUNSEL'S OPINION THAT IT WOULD BE UNCONSCIONABLE TO DENY RESCISSION, WE DO NOT BELIEVE THE MISTAKE IS SO GREAT AS TO REQUIRE APPLICATION OF THAT PRINCIPLE. SEE B-174686, JULY 14, 1972; B-165744, DECEMBER 19, 1968; B-143216, AUGUST 18, 1960; AND 20 COMP. GEN. 286 (1940). IN ADDITION, WE DO NOT FEEL THAT THE GOVERNMENT WOULD BE "OBVIOUSLY GETTING SOMETHING FOR NOTHING" UNDER FLORIDA'S CONTRACT, PURSUANT TO THE RATIONALE OF THE KEMP CASE, INASMUCH AS IT APPEARS THAT THE ITEMS CAN BE PROCURED ON AN UNRESTRICTED BASIS FOR A SIGNIFICANTLY LOWER PRICE THAN WAS ACTUALLY BID BY FLORIDA.

WHILE WE ARE THEREFORE UNABLE TO CONCLUDE THAT THE CONTRACT SHOULD BE RESCINDED BECAUSE OF FLORIDA'S UNILATERAL MISTAKE, WE WOULD NOT OBJECT TO ACCEDING TO FLORIDA'S REQUEST TO RESCIND THE CONTRACT IF THE GOVERNMENT'S ESTIMATE OF $1,550 A UNIT IS CONSIDERED TO BE CURRENTLY VALID, AND THE CONTRACTING OFFICER IS ABLE TO OBTAIN SOME ASSURANCE THAT THE PUMP LINERS CAN BE PROCURED ON AN UNRESTRICTED BASIS AT A SIGNIFICANTLY LOWER PRICE, AS IS INDICATED BY THE LOW LARGE BUSINESS BID. IN SUCH CIRCUMSTANCES, RESCISSION WOULD BE CONSIDERED TO BE IN THE GOVERNMENT'S BEST INTEREST.

THE FILE TRANSMITTED WITH THE LETTER OF NOVEMBER 9 IS RETURNED.