B-161863, MAR. 18, 1968

B-161863, MAR. 18, 1968

TO MR. E. K. GUBIN:

REFERENCE IS MADE TO YOUR LETTER DATED JUNE 21, 1967, AND TO SUBSEQUENT CORRESPONDENCE, CONCERNING THE REQUEST MADE ON BEHALF OF LEAR SIEGLER, INCORPORATED, ELECTRONIC INSTRUMENTATION DIVISION, ANAHEIM, CALIFORNIA, THAT WE AUTHORIZE THE NEGOTIATION OF A PRICE ADJUSTMENT UNDER A CONTRACT WHICH WAS AWARDED TO THAT COMPANY PURSUANT TO A REQUEST FOR PROPOSALS ISSUED BY THE FORT MEADE PROCUREMENT DIVISION, PRODUCTION AND PROCUREMENT DIRECTORATE, UNITED STATES ARMY ELECTRONIC COMMAND, FOR THE PROCUREMENT OF SPECIFIED ITEMS OF EQUIPMENT AND THE PERFORMANCE OF RELATED ENGINEERING SERVICES.

IN THE LETTER OF JUNE 21, 1967, YOU EXPRESSED THE OPINION THAT RELIEF SHOULD BE GRANTED ON THE BASIS THAT THE CONTRACTING OFFICER WAS AT THE TIME OF AWARD ON NOTICE OF THE PROBABILITY THAT A GROSS ERROR WAS MADE IN THE LEAR SIEGLER PROPOSAL. YOU ALLEGED THAT THERE WAS A WIDE DISPARITY BETWEEN THE LEAR SIEGLER OFFER AND THE TOTAL PRICES PROPOSED BY TWO OTHER COMPETENT OFFERORS, AT LEAST ONE OF WHOM WAS A PRIOR PRODUCER OF THE DESIRED ITEMS OF EQUIPMENT; THAT LEAR SIEGLER'S TOTAL PRICE WAS SUBSTANTIALLY BELOW THE GOVERNMENT'S COST ESTIMATE; THAT LEAR SIEGLER'S ITEM PRICES VARIED SUBSTANTIALLY FROM PRICES PAID BY THE SAME GOVERNMENT AGENCY ON PRIOR PROCUREMENTS OF SIMILAR SUPPLIES; AND THAT THE VALUE OF THE ITEMS BEING PROCURED FAR EXCEEDED THE PRICES PROPOSED BY LEAR SIEGLER.

AN ADMINISTRATIVE REPORT ON THE REQUEST IN THE MATTER WAS OBTAINED FROM THE DEPARTMENT OF THE ARMY AND COPIES OF CERTAIN OF THE MATERIAL SUBMITTED WITH THE REPORT WERE FURNISHED TO YOU IN ACCORDANCE WITH YOUR REQUEST. THE DEPARTMENT OF THE ARMY RECOMMENDED THAT THE REQUEST FOR NEGOTIATION OF A CONTRACT PRICE ADJUSTMENT BE DENIED FOR THE REASONS THAT THE GOVERNMENT DID ALL THAT IT WAS REASONABLY REQUIRED TO DO TO ASCERTAIN THE CORRECTNESS OF THE LEAR SIEGLER PROPOSAL; THAT THE COMPANY WAS SPECIFICALLY REQUESTED, NOT ONLY TO VERIFY ITS PRICE, BUT ALSO TO VERIFY ITS UNDERSTANDING OF THE TECHNICAL TASK REQUIRED IF IT RECEIVED THE CONTRACT; AND THAT THE COMPANY UNEQUIVOCALLY CONFIRMED ITS PROPOSAL BOTH IN REGARD TO PRICE AND IN REGARD TO THE COMPANY'S UNDERSTANDING OF THE TECHNICAL REQUIREMENTS OF THE PROPOSED CONTRACT.

PROPOSALS WERE REQUESTED FROM SEVEN FIRMS AND OF THE FOUR PROPOSALS RECEIVED BY DECEMBER 13, 1965, ONE WAS CONSIDERED TO BE NONRESPONSIVE. THE OTHER THREE PROPOSALS WERE SUBMITTED BY LEAR SIEGLER, TEXAS INSTRUMENTS, INCORPORATED, AND THE GENERAL ELECTRIC COMPANY. THE TOTAL PRICE OF THE LEAR SIEGLER PROPOSAL WAS CONSIDERABLY LESS THAN THE TOTAL PROPOSED PRICES OF TEXAS INSTRUMENTS AND GENERAL ELECTRIC. IN MAKING TECHNICAL EVALUATIONS IT WAS CONSIDERED THAT THE LEAR SIEGLER PROPOSAL WAS DEFICIENT. IT WAS ALSO SUSPECTED THAT THE LEAR SIEGLER PRICE WAS TOO LOW FOR PERFORMANCE STRICTLY IN ACCORDANCE WITH THE GOVERNMENT'S REQUIREMENTS. ALTHOUGH IT APPEARS THAT LEAR SIEGLER WAS NOT ADVISED OF THE PRICES QUOTED IN THE PROPOSALS SUBMITTED BY TEXAS INSTRUMENTS AND GENERAL ELECTRIC, OR THE AMOUNT OF THE GOVERNMENT'S TOTAL COST ESTIMATE, THE RECORD SHOWS THAT IN 1963 A CONTRACT FOR THE PRODUCTION OF SIMILAR ITEMS OF EQUIPMENT WAS AWARDED TO GENERAL ELECTRIC AND THAT THE PRICES THEN BEING PAID UNDER THAT CONTRACT WERE MADE KNOWN TO ALL FIRMS SOLICITED UNDER THE REQUEST FOR PROPOSALS HERE INVOLVED.

AS THE RESULT OF DISCUSSIONS WITH LEAR SIEGLER REPRESENTATIVES ON JANUARY 12, 1966, AND THE LATER SUBMISSION OF EVIDENCE TO SHOW THAT LEAR SIEGLER FULLY UNDERSTOOD THE TECHNICAL REQUIREMENTS, THE INITIAL EVALUATION OF ITS TECHNICAL PROPOSAL AS DEFICIENT WAS CHANGED TO ONE OF ACCEPTABILITY. LETTER DATED JANUARY 19, 1966, LEAR SIEGLER FURNISHED, AS REQUESTED, A REAFFIRMATION OF ITS FIXED-PRICE PROPOSAL, AND THE COMPANY'S POSITION WAS NOT CHANGED IN SUBSEQUENT CORRESPONDENCE WHICH DEVELOPED PRIOR TO FEBRUARY 16, 1966, WHEN THE CONTRACTING OFFICER FORMALLY DETERMINED THAT LEAR SIEGLER "IS RESPONSIBLE AND CAPABLE OF PERFORMING THE PROPOSED AWARD.' NOTICE OF CONTRACT AWARD WAS ISSUED TO LEAR SIEGLER ON MARCH 18, 1966, AND THE DEFINITIVE CONTRACT WHICH WAS BASED ON THE ACCEPTED PROPOSAL WAS FULLY EXECUTED BY THE PARTIES AS OF JULY 22, 1966.

DURING THE EARLY PART OF THE YEAR 1967, LEAR SIEGLER ADVISED THE PROCUREMENT AGENCY THAT IT PROBABLY WOULD SUFFER A SERIOUS LOSS IN PERFORMING THE CONTRACT AND THE COMPANY EVENTUALLY REQUESTED THAT NEGOTIATIONS BE UNDERTAKEN FOR THE PURPOSE OF EFFECTING AN APPROPRIATE CONTRACT PRICE ADJUSTMENT WITH RESPECT TO PRICING ERRORS MADE IN ITS PROPOSAL. THE CONTRACTING OFFICER REPORTEDLY ADVISED THE COMPANY BY LETTER DATED MAY 11, 1967, THAT THERE WAS NO LEGAL JUSTIFICATION FOR THE CONDUCT OF ANY SUCH NEGOTIATIONS; AND HIS POSITION IN THE MATTER IS SUPPORTED IN A MEMORANDUM PREPARED BY THE DIVISION COUNSEL, FORT MEADE PROCUREMENT DIVISION, WHICH WAS SUBMITTED WITH THE DEPARTMENTAL REPORT IN THE CASE.

THE CONTRACTING OFFICER'S GENERAL REPORT ON THE REQUEST FOR NEGOTIATION OF A CONTRACT PRICE ADJUSTMENT SETS FORTH THAT HE OPENED THE JANUARY 12, 1966, CONFERENCE WITH THE ANNOUNCEMENT THAT THE PURPOSE OF THE MEETING WAS TO EXPLORE IN DEPTH LEAR SIEGLER'S UNDERSTANDING OF ITS TECHNICAL RESPONSIBILITY IF IT RECEIVED THE CONTRACT. IT WAS EXPLAINED THAT THE GOVERNMENT HAD SINCERE DOUBTS THAT LEAR SIEGLER COULD PERFORM THE CONTRACT WITHIN THE AMOUNT PROPOSED; THAT THERE WOULD BE NO NEGOTIATIONS ON THE PROPOSED PRICE; AND THAT THIS WAS A SITUATION WHERE LEAR SIEGLER COULD EITHER REAFFIRM ITS PROPOSAL WITH THE ATTENDANT ANSWERS TO TECHNICAL QUESTIONS WHICH WOULD BE DISCUSSED, OR WITHDRAW ITS PROPOSAL BECAUSE OF A LACK OF A THOROUGH UNDERSTANDING OF THE GOVERNMENT'S REQUIREMENTS.

THE CONTRACTING OFFICER SUBMITTED A SEPARATE REPORT FURNISHING MORE DETAILED INFORMATION CONCERNING THE PRINCIPAL MEETING ON JANUARY 12, 1966, AND A PRIVATE MEETING ON THE SAME DATE IN WHICH THE CONTRACTING OFFICER AND ANOTHER GOVERNMENT REPRESENTATIVE, MR. HOWARD C. BARLOW, DISCUSSED THE LEAR SIEGLER PROPOSAL WITH TWO OF ITS VICE PRESIDENTS, MR. E. J. ISENBERGER AND MR. RICHARD C. KOPEREK. ACCORDING TO THAT REPORT, THE LEAR SIEGLER REPRESENTATIVES PROVIDED ANSWERS AND CLARIFICATIONS IN REGARD TO A LIST OF QUESTIONS UNDER CONSIDERATION DURING THE PRINCIPAL MEETING. VARIOUS TIMES THE LEAR SIEGLER REPRESENTATIVES LEFT THE CONFERENCE TO CAUCUS AMONG THEMSELVES WHEN IT WAS UNMISTAKABLY MADE CLEAR THAT THERE WAS UNDERPRICING. CONSIDERATION OF THE REPRESENTATIVE SPARE PARTS OCCASIONED SUCH A CAUCUS AND, AFTER EACH MAJOR DISCUSSION AND ITS ATTENDANT CAUCUS, THERE WAS ORAL CONFIRMATION THAT THE PROPOSAL WAS CORRECT AND THAT LEAR SIEGLER WOULD CONFIRM ITS POSITION IN WRITING. DURING THE PRIVATE MEETING WITH MR. ISENBERGER AND MR. KOPEREK IT WAS EXPLAINED TO THEM THAT THE PROPOSAL WAS SO MUCH LOWER THAN THE OTHER OFFERS RECEIVED THAT THERE MUST HAVE BEEN SOME ERROR NOTWITHSTANDING THE QUESTION AND ANSWER SESSION WHERE REAFFIRMATION AFTER REAFFIRMATION WAS MADE OF COMPLETE UNDERSTANDING. THE MAXIMUM EXTENT OF THE MISTAKE WHICH APPEARED TO BE POSSIBLE WAS INDICATED BUT MR. ISENBERGER ADVISED THAT LEAR SIEGLER HAD MADE A THOROUGH PRICING REVIEW, TOGETHER WITH A THOROUGH EXAMINATION OF ALL ELEMENTS OF COST, AND THAT HE BELIEVED THAT THE PROPOSAL WAS SOUND AND ADEQUATE FROM THE STANDPOINT OF ANY FINANCIAL STRAIN. MR. ISENBERGER IS ALSO REPORTED AS HAVING STATED THAT HIS COMPANY NEEDED THE WORK AND THAT HE DEFINITELY DID NOT WANT TO WITHDRAW THE PROPOSAL.

MR. BARLOW ALSO SUBMITTED A STATEMENT, INDICATING THAT DURING THE PRIVATE MEETING ON JANUARY 12, 1966, THE LEAR SIEGLER REPRESENTATIVES WERE INFORMED BY THE CONTRACTING OFFICER THAT THE LEAR SIEGLER OFFER WAS SUBSTANTIALLY BELOW THE CURRENT GENERAL ELECTRIC PRICE AND THAT THERE WAS SOME CONCERN AS TO WHETHER LEAR SIEGLER FULLY UNDERSTOOD THE TECHNICAL REQUIREMENTS. MR. BARLOW STATED THAT MR. ISENBERGER VERY EMPHATICALLY INDICATED HIS BELIEF THAT LEAR SIEGLER FULLY UNDERSTOOD THE TECHNICAL REQUIREMENTS. MR. ISENBERGER PURPORTEDLY REALIZED THAT LEAR SIEGLER HAD SUBMITTED A LOW PROPOSAL BUT EXPLAINED THAT THE COMPANY'S LOS ANGELES PLANT HAD JUST COMPLETED A MAJOR CONTRACT AND NEEDED ADDITIONAL WORK TO HOLD TOGETHER ITS KEY PERSONNEL AND TO COVER OVERHEAD EXPENSES. MR. ISENBERGER ALSO PURPORTEDLY INDICATED THAT HE WOULD UNDERTAKE A REVIEW OF THE LEAR SIEGLER PRICES AND WOULD CONFIRM THE COMPANY'S POSITION IN WRITING.

BY LETTER DATED DECEMBER 19, 1967, YOU SUBMITTED A BRIEF, WITH VARIOUS ATTACHMENTS, INCLUDING AFFIDAVITS OF LEAR SIEGLER PERSONNEL, AND YOU SUGGESTED THAT THE MATERIAL SUBMITTED WITH THE LETTER CLEARLY SHOWS THAT THE CONTRACTING OFFICER DID NOT FOLLOW PROPER NEGOTIATION PROCEDURES. YOU ALSO SUGGESTED THAT THE CONTRACTING OFFICER WAS MOTIVATED BY A DESIRE TO SAVE MONEY FOR THE GOVERNMENT AND STATED THAT, ALTHOUGH THE LEAR SIEGLER COMMENTS ARE IN NO WAY INTENDED TO REFLECT ON THE CONTRACTING OFFICER'S VERACITY, LEARSIEGLER "QUESTIONS HIS RECOLLECTION OF WHAT HE THOUGHT HE SAID OR WHAT HE THOUGHT HE IMPLIED AT THE JAN. 12 MEETING.'

IN THE AFFIDAVITS OF THE LEAR SIEGLER PERSONNEL, INCLUDING THOSE OF THE TWO ABOVE-NAMED VICE PRESIDENTS OF THE COMPANY, IT IS INDICATED THAT THE STATED PURPOSE OF THE "OPEN" MEETINGS ON JANUARY 12, 1966, WAS TO DISCUSS THE TECHNICAL FEATURES OF THE LEAR SIEGLER PROPOSAL, AND THAT NONE OF THE LEAR SIEGLER REPRESENTATIVES RECALLS ANY STATEMENT AT THE OPEN MEETINGS TO THE EFFECT THAT THE GOVERNMENT SUSPECTED THAT A MISTAKE WAS MADE IN THE PROPOSAL PRICE, THAT THE PROPOSAL PRICE COULD NOT BE INCREASED BUT THAT THE PROPOSAL COULD BE WITHDRAWN, IF SO DESIRED. IN THE AFFIDAVITS OF THE TWO VICE PRESIDENTS OF THE COMPANY, IT IS ALLEGED THAT LEAR SIEGLER WAS NEVER REQUESTED TO REAFFIRM ITS PRICE BUT ONLY TO AFFIRM ITS TECHNICAL UNDERSTANDING OF THE REQUIREMENTS OF THE PROPOSED CONTRACT. THEY STATE THAT THERE WAS NEVER ANY CAUCUSING TO DISCUSS UNDERPRICING AND THAT THE QUESTION WHETHER THE COMPANY DESIRED TO WITHDRAW THE PROPOSAL WAS DISCUSSED ONLY AT THE PRIVATE MEETING WITH THE CONTRACTING OFFICER AND MR. BARLOW. MR. BARLOW IS ALLEGED TO HAVE STATED AT THE PRIVATE MEETING THAT THE LEAR SIEGLER PROPOSAL "SEEMED SUBSTANTIALLY LOW" AND THAT HE WANTED TO GIVE LEAR SIEGLER AN OPPORTUNITY TO WITHDRAW. THE GOVERNMENT REPRESENTATIVES ALLEGEDLY WERE ADVISED THAT SUCH A DECISION COULD NOT BE MADE WITHOUT CONSULTING WITH OTHER PERSONNEL OF THE COMPANY AND UNDERTAKING A REVIEW OF THE WORKING PAPERS AND BID PROPOSALS, WHICH WOULD TAKE APPROXIMATELY SIX WEEKS. IT IS ALLEGED THAT NO DOLLAR AMOUNT WAS MENTIONED AT THE PRIVATE MEETING; THAT THERE WAS NO STATEMENT OR INDICATION THAT, IN THE OPINION OF THE GOVERNMENT'S REPRESENTATIVES, THE COMPANY MIGHT LOSE A LARGE AMOUNT OF MONEY; AND THAT MR. ISENBERGER MADE IT CLEAR THAT LEAR SIEGLER DID NOT "BUY-IN" TO GET A CONTRACT. MR. ISENBERGER SUGGESTED IN HIS AFFIDAVIT DATED SEPTEMBER 19, 1967, THAT THERE IS A CONSIDERABLE DIFFERENCE BETWEEN A STATEMENT THAT THE PROPOSAL PRICE "SEEMED SUBSTANTIALLY LOW" AND ANY INFERENCE THAT LEAR SIEGLER WAS TOLD THAT ITS PRICE WAS "TOO LOW.'

ALTHOUGH IT IS DENIED THAT THERE WAS ANY CAUCUSING OF LEAR SIEGLER PERSONNEL DURING THE OPEN MEETINGS ON JANUARY 12, 1966, TO DISCUSS UNDERPRICING, MR. KOPEREK STATED IN HIS AFFIDAVIT OF SEPTEMBER 19,1967, THAT THERE WAS SOME SIDE DISCUSSION OF AN ITEM WHICH HE BELIEVED TO BE A SPARE PART. THE LEAR SIEGLER REPRESENTATIVES PURPORTEDLY WERE ASKED HOW THE COMPANY COULD GET SUCH AN ADVANTAGEOUS PRICE BUT MR. KOPERICK INDICATED THAT THE GOVERNMENT REPRESENTATIVES WERE ACTUALLY QUESTIONING WHETHER LEAR SIEGLER WOULD SUPPLY CORRECT PARTS. EVIDENCE WAS LATER SUBMITTED TO SHOW THAT THE COMPONENT MENTIONED BY MR. KOPEREK WAS PRICED AT $2.65 EACH FOR ONLY TWO UNITS AS COMPARED WITH A PRICE OF $5.05 EACH, WHICH THE GOVERNMENT HAD BEEN PAYING FOR THE SAME COMPONENT. LEAR SIEGLER ALSO ADVISED THAT THE SPARE PARTS REQUIRED TO BE FURNISHED UNDER THE CONTRACT INVOLVE ONLY ABOUT 5 TO 10 PERCENT OF THE TOTAL PARTS TO BE FOUND IN THE BASIC ITEM OF EQUIPMENT.

YOUR BRIEF REFERS TO VARIOUS DECISIONS OF OUR OFFICE AND THE COURTS IN REGARD TO ALLEGED MISTAKES IN BIDDING ON GOVERNMENT CONTRACTS. THE RESPONSIBILITY FOR THE PREPARATION OF A BID IS UPON THE BIDDER BUT RELIEF MAY BE GRANTED FROM THE CONSEQUENCES OF A GROSS MISTAKE IN BID WHICH IS ALLEGED AFTER THE MAKING OF A CONTRACT AWARD IF THE CONTRACTING OFFICER KNEW OF THE MISTAKE WHEN HE ACCEPTED THE BID OR THE CIRCUMSTANCES OF THE CASE WERE SUCH AS TO JUSTIFY A CONCLUSION THAT HE SHOULD HAVE KNOWN AT THE TIME OF CONTRACT AWARD THAT THE MISTAKE WAS MADE. FACTORS SUCH AS THE PRICES QUOTED BY OTHER BIDDERS, THE PRICE PAID BY THE GOVERNMENT FOR SIMILAR SUPPLIES UNDER A PREVIOUS CONTRACT, THE GOVERNMENT'S COST ESTIMATE AND THE KNOWN VALUE OF THE SUPPLIES HAVE BEEN CONSIDERED TO BE RELEVANT TO A DETERMINATION WHETHER A CONTRACTING OFFICER SHOULD HAVE REQUESTED A VERIFICATION OF A BID PRIOR TO ITS ACCEPTANCE. HOWEVER, AS A GENERAL RULE, IF A CONTRACTING OFFICER HAS ANY REASON TO SUSPECT THAT A SERIOUS MISTAKE HAS BEEN MADE IN A BID, THE AWARD OF A CONTRACT FOLLOWING VERIFICATION OF THE BID UPON REQUEST OF THE CONTRACTING OFFICER, OR UPON RECEIPT BY THE BIDDER OF A WARNING FROM ANY RESPONSIBLE PROCUREMENT OFFICIAL THAT A MISTAKE MIGHT HAVE BEEN MADE, RESULTS IN A VALID AND BINDING CONTRACT. SEE ALABAMA SHIRT AND TROUSER CO. V UNITED STATES, 121 CT. CL. 313, WHEREIN THE COURT OF CLAIMS CONCLUDED THAT THE GOVERNMENT'S AGENTS DID ALL THAT COULD HAVE BEEN EXPECTED TO PROTECT THE PLAINTIFF FROM ITS OWN IMPRUDENCE, AND THAT THE PLAINTIFF COULD NOT CHARGE THE GOVERNMENT "WITH HAVING SNAPPED UP AN ADVANTAGEOUS OFFER MADE BY MISTAKE.'

YOU HAVE CITED CERTAIN OF OUR DECISIONS WHICH ARE TO THE EFFECT THAT A REQUEST FOR VERIFICATION OF A BID SHOULD NOT BE STATED IN GENERAL TERMS BUT SHOULD PLACE THE BIDDER ON NOTICE OF THE REASONS FOR SUSPECTING ERROR AND THE EXTENT OF THE ERROR WHICH IS SURMISED. AS STATED IN 44 COMP. GEN. 383, WE HAVE RECOGNIZED AND FOLLOWED THE RULING IN UNITED STATES V METRO NOVELTY MANUFACTURING CO., 125 F.SUPP. 713, THAT REAFFIRMATION OF A BID, WHERE THE PLAINTIFF WAS NOT PLACED ON NOTICE OF THE MISTAKE WHICH THE GOVERNMENT SURMISED, DID NOT BAR THE DEFENSE OF RESCISSION.

IT IS CONTENDED IN YOUR BRIEF (1) THAT THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF A GROSS MISTAKE IN THE LEAR SIEGLER PROPOSAL AT THE TIME THAT HE AWARDED THE CONTRACT TO LEAR SIEGLER; (2) THAT HE SHOULD HAVE KNOWN, AND IN FACT KNEW, OF THE POSSIBILITY OF A GROSS MISTAKE IN THE PROPOSAL AS SUBMITTED; (3) THAT, IF THE CONTRACTING OFFICER HAD COMPLIED WITH THE PROVISIONS OF SUBSECTION 3-807.3, ARMED SERVICES PROCUREMENT REGULATION (ASPR), HE WOULD HAVE HAD ACTUAL NOTICE OF THE NATURE AND EXTENT OF THE ERROR MADE BY LEAR SIEGLER; (4) THAT THE CONTRACTING OFFICER NEVER MADE AN ADEQUATE OR SUFFICIENT REQUEST FOR VERIFICATION OF THE PROPOSAL PRICE; (5) THAT, EVEN IF AN ADEQUATE REQUEST FOR VERIFICATION HAD BEEN MADE, LEAR SIEGLER WAS NOT ALLOWED A REASONABLE TIME TO REVIEW AND CHECK THE PROPOSAL PRICE; (6) THAT THE CONTRACTING OFFICER WAS REQUIRED TO DO MORE THAN MAKE A FULL DISCLOSURE OF HIS REASONS FOR SUSPECTING A GROSS MISTAKE -- A REQUEST TO RECHECK AND RECOMPUTE WAS NECESSARY; (7) THAT A FURTHER REQUEST FOR VERIFICATION WAS REQUIRED AFTER JANUARY 12, 1966, AND/OR THE DATE ON WHICH LEAR SIEGLER REAFFIRMED THE FIXED-PRICE PROPOSAL; AND (8) THAT THE CONTRACTING OFFICER SHOULD NOW BE REQUIRED TO ENGAGE IN ACCEPTABLE PRICE VERIFICATION PROCEDURES.

BEFORE CONSIDERING YOUR SPECIFIC CONTENTIONS, IT SHOULD BE EMPHASIZED THAT NO CORRECTION OF ERROR, WHETHER ALLEGED BEFORE OR AFTER AWARD, MAY BE CONSIDERED EXCEPT UPON PRESENTATION OF EVIDENCE CLEARLY AND CONVINCINGLY ESTABLISHING WHAT THE PRICE WOULD HAVE BEEN BUT FOR THE ERROR. 37 COMP. GEN. 706. NO SUCH EVIDENCE HAS BEEN PRESENTED. IN ANY CASE, WE CONCLUDE FOR THE REASONS PRESENTED BELOW THAT NO PRICE INCREASE MAY BE PERMITTED UNDER THE RULES GOVERNING MISTAKES.

WITH RESPECT TO YOUR FIRST TWO CONTENTIONS, THE POSSIBILITY OF A GROSS MISTAKE IN A BID OR PROPOSAL IS ALWAYS PRESENT, PARTICULARLY WHERE THE PROCUREMENT INVOLVED CONCERNS THE FURNISHING OF ITEMS WHICH THE PROSPECTIVE CONTRACTOR HAS NOT PREVIOUSLY PRODUCED. HOWEVER, IT DOES NOT NECESSARILY FOLLOW THAT KNOWLEDGE OR RECOGNITION OF THE POSSIBILITY OF A GROSS MISTAKE IN A BID OR PROPOSAL WOULD AFFORD A BASIS FOR THE GRANTING OF RELIEF TO A CONTRACTOR WHO ALLEGES PRICING ERRORS AFTER RECEIPT OF THE CONTRACT AND IS ABLE TO PROVE THAT MISTAKES HAD BEEN MADE. THE CONTRACTOR WOULD BE ENTITLED TO RECOVER ONLY IF THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF THE MISTAKES WHEN THE BID OR PROPOSAL WAS ACCEPTED. SEE MICHEAL CHERNICK V UNITED STATES, 178 CT. CL. 498.

THE CONTRACTING OFFICER COULD NOT HAVE BEEN CERTAIN THAT ANY SERIOUS MISTAKE WAS MADE IN THE LEAR SIEGLER PROPOSAL, ALTHOUGH HE MIGHT HAVE SUSPECTED OR SURMISED ERROR BECAUSE THE LEAR SIEGLER PRICES WERE CONSIDERABLY LOWER THAN (1) THE PRICES WHICH THE GOVERNMENT HAD BEEN PAYING FOR SIMILAR SUPPLIES UNDER THE 1963 CONTRACT, (2) THE GOVERNMENT'S COST ESTIMATE, WHICH APPEARS TO HAVE BEEN BASED UPON A BELIEF THAT THE GENERAL ELECTRIC COMPANY WOULD QUOTE LOWER PRICES ON A FOLLOW-ON PROCUREMENT UNDER WHICH THERE WOULD BE A MINIMUM OF DEVELOPMENT COSTS, AND (3) THE PRICES WHICH WERE QUOTED BY GENERAL ELECTRIC AND TEXAS INSTRUMENTS IN THEIR PROPOSALS. IT IS THE CONTRACTING OFFICER'S POSITION THAT HIS APPREHENSIONS IN THE MATTER CLEARLY WERE MADE KNOWN TO THE LEAR SIEGLER REPRESENTATIVES WHO ATTENDED THE MEETINGS ON JANUARY 12, 1966, AND THERE WAS NOTHING IN THE LEAR SIEGLER LETTER REAFFIRMING ITS FIXED-PRICE PROPOSAL TO PLACE THE CONTRACTING OFFICER ON NOTICE THAT A SUFFICIENT VERIFICATION OF THE PROPOSAL PRICES HAD NOT BEEN MADE OR THAT THE LETTER WAS INTENDED ONLY TO REAFFIRM LEAR SIEGLER'S POSITION THAT IT WAS FULLY CAPABLE OF MEETING THE TECHNICAL REQUIREMENTS OF THE PROPOSED CONTRACT.

IN SUCH CIRCUMSTANCES, IF THE FACTS OF THE CASE ARE AS HAVE BEEN INDICATED IN THE STATEMENTS OF THE CONTRACTING OFFICER AND MR. BARLOW, IT WOULD APPEAR THAT, REGARDLESS OF THE CONTRACTING OFFICER'S OPINION OF THE PROPOSAL PRICE, NO FURTHER PRICE VERIFICATION WAS NECESSARY FOR THE PURPOSE OF MAKING A VALID CONTRACT AWARD TO LEAR SIEGLER AFTER THAT FIRM WAS DETERMINED TO BE ,RESPONSIBLE AND CAPABLE OF PERFORMING THE PROPOSED CONTRACT.' SEE 27 COMP. GEN. 17; 37 ID. 786; B-159923, OCTOBER 19, 1966.

IN REGARD TO THE THIRD CONTENTION, THE PRICING TECHNIQUES OF ASPR 3 807 REQUIRE THAT SOME FORM OF PRICE OR COST ANALYSIS BE MADE IN EVERY NEGOTIATED PROCUREMENT ACTION BUT IT IS PROVIDED IN ASPR 3-807.3 (C) THAT COST OR PRICING DATA SHOULD NOT BE REQUESTED REGARDLESS OF THE DOLLAR AMOUNT INVOLVED WHERE THERE IS ADEQUATE COMPETITION. ADEQUATE PRICE COMPETITION IS DEFINED IN ASPR 3-807.1 (B) (1), AND THAT REGULATION IS TO THE EFFECT THAT PRICE COMPETITION EXISTS IF OFFERS ARE SOLICITED AND AT LEAST TWO RESPONSIBLE OFFERORS INDEPENDENTLY SUBMIT RESPONSIVE PROPOSALS; ALSO, THAT, IF THOSE CONDITIONS ARE MET, PRICE COMPETITION MAY BE PRESUMED TO BE ADEQUATE EXCEPT UNDER CIRCUMSTANCES WHICH ARE NOT HERE MATERIAL. THE REGULATION FURTHER PROVIDES THAT WHETHER THERE IS PRICE COMPETITION FOR A GIVEN PROCUREMENT IS A MATTER OF JUDGMENT TO BE BASED ON EVALUATION OF WHETHER EACH OF THE SPECIFIED CONDITIONS FOR THE EXISTENCE OF PRICE COMPETITION IS MET.

YOU CONTEND THAT THE CONTRACTING OFFICER SHOULD HAVE DETERMINED THAT PRICE COMPETITION DID NOT EXIST IN THIS CASE, BUT WE FIND NO REASONABLE BASIS FOR ANY SUCH CONTENTION. APPARENTLY THREE RESPONSIVE PROPOSALS WERE SUBMITTED AND IT WAS DETERMINED THAT LEAR SIEGLER QUALIFIED AS A RESPONSIBLE PROSPECTIVE CONTRACTOR. FURTHERMORE, THERE WAS NO APPARENT REASON TO BELIEVE THAT GENERAL ELECTRIC AND TEXAS INSTRUMENTS COULD NOT HAVE QUALIFIED AS RESPONSIBLE PROSPECTIVE CONTRACTORS FOR THE FURNISHING OF THE DESIRED EQUIPMENT AND THE PERFORMANCE OF THE RELATED ENGINEERING SERVICES.

WITH REFERENCE TO YOUR FOURTH CONTENTION, YOU STATE THAT, IF THE CONTACTING OFFICER HAD REALLY INTENDED TO NOTIFY LEAR SIEGLER OF A POSSIBLE MISTAKE IN ITS PRICE PROPOSAL, IT WOULD HAVE BEEN SIMPLE ENOUGH TO DO SO AND YOU CITE AS AN EXAMPLE OF A PROPER REQUEST FOR PRICE VERIFICATION A LETTER TO A DEFAULTING CONTRACTOR WHICH IS QUOTED IN A DECISION RENDERED ON FEBRUARY 23, 1967, BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 11344. THE CONTRACT IN THAT CASE WAS AWARDED PURSUANT TO FORMAL ADVERTISING AND IT WAS ASSUMED IN THE LETTER THAT THE CONTRACTOR KNEW THE PRICES QUOTED BY OTHER BIDDERS. HOWEVER, IN THE CASE OF A NEGOTIATED PROCUREMENT, PROSPECTIVE CONTRACTORS ARE NOT ADVISED OF THE PRICES QUOTED BY OTHER OFFERORS BEFORE CONTRACT AWARD, AND ONLY THE PRICE OR PRICES OF THE CONTRACT, AS AWARDED, MAY BE DISCLOSED TO UNSUCCESSFUL OFFERORS. SEE ASPR 3 508.3.

THERE IS NO REQUIREMENT THAT REQUESTS FOR PRICE VERIFICATIONS BE MADE IN WRITING AND IT APPEARS FROM THE STATEMENTS OF THE CONTRACTING OFFICER AND MR. BARLOW THAT FULL DISCLOSURE OF THEIR REASONS FOR SUSPECTING ERROR, AND THE MAXIMUM POTENTIAL LOSS WHICH LEAR SIEGLER MIGHT SUFFER AS THE RESULT OF THE MISTAKE WHICH APPEARED TO BE POSSIBLE, WAS MADE DURING THE MEETINGS ON JANUARY 12, 1966, EXCEPT THAT THEY DID NOT DISCLOSE THE PRICES OF THE OTHER OFFERORS OR THE GOVERNMENT'S COST ESTIMATE BECAUSE OF RESTRICTIONS APPLICABLE IN NEGOTIATING GOVERNMENT CONTRACTS.

EVEN IF THE FACTS ARE AS HAVE BEEN ALLEGED BY LEAR SIEGLER PERSONNEL, THERE IS A REASONABLE BASIS FOR CONCLUDING THAT LEAR SIEGLER HAD SUFFICIENT WARNING IN REGARD TO THE GOVERNMENT'S SUSPICION THAT THE PROPOSAL PRICE WAS TOO LOW WHEN MR. BARLOW ALLEGEDLY RAISED THE QUESTION WHETHER LEAR SIEGLER "HAD BOUGHT THIS JOB," AND LATER EXPLAINED THAT HE ASKED SUCH QUESTION BECAUSE THE PROPOSAL SEEMED SUBSTANTIALLY LOW, AND HE WANTED TO GIVE LEAR SIEGLER AN OPPORTUNITY TO WITHDRAW THE PROPOSAL. THERE WAS ANY DOUBT AS TO THE FULL IMPORT OF MR. BARLOW'S ALLEGED QUESTION AND STATEMENT, MR. ISENBERGER'S RESPONSE, AS ALLEGED BY HIM, CLEARLY SHOWS THAT HE RECOGNIZED AND UNDERSTOOD WHAT WAS INVOLVED. MR. ISENBERGER KNEW THAT HE AND MR. KOPEREK SHOULD NOT MAKE ANY DECISION WHETHER OR NOT TO WITHDRAW THE PROPOSAL WITHOUT CONSULTING WITH OTHER LEAR SIEGLER PERSONNEL AND UNDERTAKING A THOROUGH REVIEW OF PRICES QUOTED BY PROPOSED SUPPLIERS AND OTHER DATA INCLUDED IN THE COMPANY'S WORKING PAPERS CONCERNING THE PROPOSAL AS SUBMITTED.

THE FACT THAT THE GOVERNMENT'S SUSPICION OF EITHER A GROSS MISTAKE OR THAT LEAR SIEGLER DID NOT FULLY UNDERSTAND THE TECHNICAL REQUIREMENTS OF THE REQUEST FOR PROPOSALS SHOULD HAVE BEEN APPARENT TO THE LEAR SIEGLER REPRESENTATIVES IS FURTHER EVIDENCED BY A STATEMENT AT PAGE TWO OF MR. KOPEREK'S AFFIDAVIT OF JULY 27, 1967, WHEREIN MR. BARLOW IS ALLEGED TO HAVE ASKED THE QUESTION WHETHER LEAR SIEGLER WAS TRYING TO "BUY-IN" ON THE PROGRAM OR "DID WE NOT UNDERSTAND THE STATEMENT OF WORK? " ALTHOUGH IT IS THE LEAR SIEGLER POSITION THAT THEY UNDERSTOOD THAT THE GOVERNMENT WAS QUESTIONING ONLY THE FIRM'S UNDERSTANDING OF THE TECHNICAL REQUIREMENTS OF THE PROPOSED CONTRACT, IT IS OUR OPINION THAT THE LEAR SIEGLER REPRESENTATIVES KNEW OR SHOULD HAVE KNOWN THAT THE TECHNICAL QUESTIONS WHICH WERE TO BE ANSWERED HAD A DIRECT RELATIONSHIP TO THE GOVERNMENT'S SUSPICION OF POSSIBLE ERRORS IN THE PROPOSAL PRICES.

IF THE LEAR SIEGLER REPRESENTATIVES WERE NOT FURNISHED DETAILS WHICH YOU CONSIDER TO HAVE BEEN REQUIRED, THIS APPARENTLY WAS NOT DUE TO ANY ATTEMPT TO SAVE THE GOVERNMENT MONEY BY TAKING ADVANTAGE OF A FIRM WHICH HAD SUBMITTED AN EXCEPTIONALLY LOW OFFER. IN A FORMALLY ADVERTISED PROCUREMENT, ALL BIDS, AND SOMETIMES THE GOVERNMENT'S COST ESTIMATES, ARE PUBLICLY DISCLOSED AFTER OPENING OF BIDS. HOWEVER, OUR DECISIONS REGARDING PRICE VERIFICATIONS, INCLUDING B-163031, FEBRUARY 9, 1968, RECENTLY CITED BY YOU, CANNOT BE REGARDED AS INDICATING THAT THE PRICES OF OTHER OFFERORS OR THE GOVERNMENT'S COST ESTIMATE MUST BE DISCLOSED TO A PROSPECTIVE CONTRACTOR ON A PROPOSED NEGOTIATED PROCUREMENT WHERE IT IS SUSPECTED THAT A MISTAKE MIGHT HAVE BEEN MADE IN THE PROPOSAL UNDER CONSIDERATION.

WITH REFERENCE TO YOUR FIFTH CONTENTION, IT IS APPARENT THAT LEAR SIEGLER SHOULD NOT HAVE REAFFIRMED THE FIXED-PRICE PROPOSAL UNLESS IT WAS COMPLETELY SATISFIED THAT THE PROPOSAL PRICES WERE SUFFICIENTLY ACCURATE TO JUSTIFY A CONCLUSION THAT THE PROPOSAL SHOULD BE AFFIRMED AND NOT WITHDRAWN. IT ALSO APPEARS THAT LEAR SIEGLER SHOULD HAVE TAKEN ADVANTAGE OF THE FACT THAT THE NOTICE OF CONTRACT AWARD WAS NOT ISSUED UNTIL APPROXIMATELY EIGHT WEEKS AFTER THE WRITTEN CONFIRMATION OF THE FIXED- PRICE PROPOSAL. THIS TIME WAS CERTAINLY ADEQUATE TO REVIEW THE PROPOSAL AND DISCOVER ANY PRICING ERRORS.

WITH REFERENCE TO YOUR SIXTH CONTENTION, THE QUESTION WHETHER A SPECIFIC REQUEST WAS MADE TO RECHECK AND RECOMPUTE THE PROPOSAL PRICES APPEARS TO BE IMMATERIAL SINCE IT IS CLEAR THAT THE LEAR SIEGLER REPRESENTATIVES WHO ATTENDED THE PRIVATE MEETING ON JANUARY 12, 1966, KNEW THAT A THOROUGH RECHECKING AND RECOMPUTATION WOULD BE NECESSARY UNLESS LEAR SIEGLER DELIBERATELY WISHED TO TAKE THE CHANCE THAT THERE WERE NO SERIOUS PRICING ERRORS IN THE PROPOSAL AS SUBMITTED.

FOR THE REASONS STATED ABOVE, PARTICULARLY IN REGARD TO YOUR FIRST TWO CONTENTIONS, WE DO NOT AGREE WITH THE SEVENTH CONTENTION THAT A FURTHER VERIFICATION OF THE LEAR SIEGLER PROPOSAL PRICES SHOULD HAVE BEEN REQUESTED AFTER THE MEETINGS ON JANUARY 12, 1966, OR AFTER JANUARY 19, 1966, WHEN THE COMPANY'S FIXED-PRICE PROPOSAL WAS REAFFIRMED IN WRITING. WHEN THE LETTER OF REAFFIRMATION WAS RECEIVED, THE CONTRACTING OFFICER HAD THE RIGHT TO ASSUME THAT THE PROPOSAL PRICES WERE AS INTENDED, REGARDLESS OF THE POSSIBILITY OF MISTAKES THEREIN. PRICING ERRORS MAY HAVE OCCURRED BUT IT WAS LEAR SIEGLER'S RESPONSIBILITY TO ESTIMATE THE PRICES AT WHICH IT COULD PERFORM THE PROPOSED CONTRACT AT A REASONABLE PROFIT AND, IF IT MADE MISTAKES IN ITS PRICING ESTIMATES, THE GOVERNMENT CANNOT FOR THAT REASON BE HELD RESPONSIBLE FOR THE RESULTING LOSS. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V UNITED STATES, 100 CT. CL. 120, 163; EDWIN DOUGHERTY AND M. H. OGDEN V UNITED STATES, 102 CT. CL. 249; SALIGMAN, ET AL. V UNITED STATES, 56 F.SUPP. 505.

WITH REFERENCE TO YOUR EIGHTH CONTENTION, IT IS OUR OPINION THAT WE WOULD NOT BE WARRANTED IN TAKING THE POSITION THAT THE CONTRACTING OFFICER SHOULD NOW ENGAGE IN NEGOTIATIONS WITH LEAR SIEGLER FOR THE PURPOSE OF MAKING ADJUSTMENTS IN THE CONTRACT PRICES ON ACCOUNT OF SUCH PRICING ERRORS AS MAY HAVE BEEN MADE IN THE LEAR SIEGLER PROPOSAL. ON THE BASIS OF THE REPORTED FACTS AND CIRCUMSTANCES OF THE CASE, OR EVEN ON THE BASIS OF THE FACTS AS HAVE BEEN ALLEGED BY THE LEAR SIEGLER REPRESENTATIVES WHO ATTENDED THE MEETINGS ON JANUARY 12, 1966, THERE APPEARS TO HAVE RESULTED A VALID AND BINDING CONTRACT WITH LEAR SIEGLER WHEN ITS PROPOSAL WAS ACCEPTED. AGENTS AND OFFICERS OF THE UNITED STATES HAVE NO AUTHORITY, WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT, TO DISPOSE OF THE PROPERTY OF THE UNITED STATES, TO MODIFY EXISTING CONTRACTS, OR TO WAIVE CONTRACT RIGHTS WHICH HAVE VESTED IN THE UNITED STATES. SEE 40 COMP. GEN. 684, 688. IT HAS LONG BEEN THE ESTABLISHED RULE THAT THE GOVERNMENT ACCOUNTING AND ADMINISTRATIVE OFFICERS SHOULD REJECT OR DISALLOW ALL CLAIMS AS TO WHICH THEY BELIEVE THERE MAY BE A SUBSTANTIAL DEFENSE IN LAW OR AS TO THE VALIDITY OF WHICH THEY ARE IN DOUBT. LONGWILL V UNITED STATES, 17 CT. CL. 288, 291; CHARLES V UNITED STATES, 19 CT. CL. 316, 319. WE BELIEVE THAT THIS RULE IS APPLICABLE TO THE FACTS AND CIRCUMSTANCES HERE INVOLVED, INDICATING THAT THERE IS A SUBSTANTIAL BASIS FOR CONSIDERING THAT THE GOVERNMENT FULFILLED ITS RESPONSIBILITY FOR VERIFYING THE PRICES QUOTED IN THE FIXED-PRICE PROPOSAL.

ACCORDINGLY, THE REQUEST MADE ON BEHALF OF LEAR SIEGLER IN THE MATTER MUST BE, AND IS, HEREBY, DENIED.