B-116678, SEPTEMBER 6, 1955, 35 COMP. GEN. 136

B-116678: Sep 6, 1955

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BIDS - MISTAKES - VERIFICATION - CONTRACTOR'S EXCESS COST LIABILITY A CONTRACTOR IS NOT BOUND. THE CONTRACTOR IS NOT LIABLE FOR EXCESS COSTS INCIDENT TO REPLACEMENT CONTRACTS. 1955: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 5. RELATIVE TO AN ERROR ALLEGED BY THE CORPORATION TO HAVE BEEN MADE IN ITS BID SUBMITTED IN RESPONSE TO INVITATION NO. ON WHICH CONTRACT NO DA 30-280-QM-33209 WAS AWARDED. IS ALSO ACKNOWLEDGED. IT WAS HELD THAT. THE ACCEPTANCE OF THE BID CONSTITUTED A VALID AND BINDING CONTRACT WITH THE RESULT THAT THERE WAS NO LEGAL BASIS FOR RELEASING THE CORPORATION FROM LIABILITY UNDER THE CONTRACT OR FOR INCREASING THE PRICE SPECIFIED. THE CONTRACTING OFFICER ADVISED THE CORPORATION THAT PURSUANT TO ARTICLE 11 OF THE CONTRACT ITS RIGHT TO PROCEED WITH THE PERFORMANCE OF THE CONTRACT WAS TERMINATED.

B-116678, SEPTEMBER 6, 1955, 35 COMP. GEN. 136

BIDS - MISTAKES - VERIFICATION - CONTRACTOR'S EXCESS COST LIABILITY A CONTRACTOR IS NOT BOUND, EVEN AFTER AWARD, BY HIS VERIFICATION OF AN ERRONEOUS BID WHERE THE CONTRACTING OFFICER'S REQUEST FOR A GENERAL VERIFICATION FAILED TO PUT HIM ON NOTICE OF THE SPECIFIC MISTAKE SURMISED, AND, THEREFORE, THE CONTRACTOR IS NOT LIABLE FOR EXCESS COSTS INCIDENT TO REPLACEMENT CONTRACTS.

TO THE SECRETARY OF THE ARMY, SEPTEMBER 6, 1955:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 5, 1955, FORWARDING A LETTER DATED SEPTEMBER 13, 1954, FROM ARANOW, BRODSKY, EINHORN AND DANN, ATTORNEYS FOR THE FOILCRAFT PRINTING CORPORATION, BROOKLYN, NEW YORK, AND OTHER ENCLOSURES. THE ATTORNEYS REQUEST RECONSIDERATION OF DECISION DATED AUGUST 26, 1953, B-116678, TO YOU, RELATIVE TO AN ERROR ALLEGED BY THE CORPORATION TO HAVE BEEN MADE IN ITS BID SUBMITTED IN RESPONSE TO INVITATION NO. QM-30-280-53-797, DATED MARCH 17, 1953, AND ON WHICH CONTRACT NO DA 30-280-QM-33209 WAS AWARDED. RECEIPT OF YOUR LETTER DATED JULY 14, 1955, WITH ENCLOSURES, IS ALSO ACKNOWLEDGED.

IN THE DECISION OF AUGUST 26, 1953, IT WAS HELD THAT, SINCE THE CORPORATION HAD VERIFIED ITS BID PRIOR TO AWARD, THE ACCEPTANCE OF THE BID CONSTITUTED A VALID AND BINDING CONTRACT WITH THE RESULT THAT THERE WAS NO LEGAL BASIS FOR RELEASING THE CORPORATION FROM LIABILITY UNDER THE CONTRACT OR FOR INCREASING THE PRICE SPECIFIED.

THE PRESENT RECORD INDICATES THAT ON SEPTEMBER 3, 1953, THE VICE PRESIDENT OF THE FOILCRAFT PRINTING CORPORATION ADVISED THE PURCHASING AGENT BY TELEPHONE THAT THE CORPORATION WOULD NOT PERFORM UNDER THE CONTRACT; THAT BY LETTER DATED SEPTEMBER 24, 1953, THE CONTRACTING OFFICER ADVISED THE CORPORATION THAT PURSUANT TO ARTICLE 11 OF THE CONTRACT ITS RIGHT TO PROCEED WITH THE PERFORMANCE OF THE CONTRACT WAS TERMINATED; AND THAT SUBSEQUENTLY REPLACEMENT CONTRACTS WERE ENTERED INTO WITH OTHER COMPANIES, WHICH RESULTED IN AN EXCESS COST TO THE GOVERNMENT.

IN THEIR LETTER OF AUGUST 12, 1954, FOILCRAFT'S ATTORNEYS CONTEND THAT (1) THE SPECIFICATIONS WERE VAGUE AND MISLEADING; (2) THAT THE CORPORATION DID NOT RECEIVE TREATMENT EQUAL TO THAT OF OTHER BIDDERS OR CONTRACTORS WHOSE LIKE ERRORS WERE SPECIFICALLY CALLED TO THEIR ATTENTION; AND (3) THAT, DESPITE THE REQUEST FOR VERIFICATION--- WHICH WAS MADE OVER THE TELEPHONE BY A SUBORDINATE OF THE CONTRACTING OFFICER -- THE GOVERNMENT DID NOT DISCHARGE ITS DUTY TO THE CORPORATION IN ACCORDANCE WITH THE TEST ESTABLISHED BY THE CASE OF UNITED STATES V. METRO NOVELTY MANUFACTURING ., INC., 125 F.1SUPP. 713. THERE THE COURT STATED AS FOLLOWS:

CROSS MOTIONS ARE PRESENTED FOR SUMMARY JUDGMENT. PLAINTIFF SEEKS TO RECOVER $12,000 DAMAGES FROM DEFENDANT FOR ITS FAILURE TO CARRY OUT A $6,000 BID FOR UNIFORM ORNAMENTS. DEFENDANT CLAIMS A MISTAKE IN THE COMPUTATION OF THE BID. PLAINTIFF ADMITS THAT THE ERROR WAS SO GROSS THAT IT WAS PLACED ON NOTICE. IT FURTHER ADMITS THAT THE ONLY CONSEQUENCE OF DEFENDANT'S FAILURE TO PERFORM WAS THE ACCEPTANCE OF THE SECOND LOWEST BID AND THAT THERE WAS NO DAMAGE TO THE GOVERNMENT FROM THE DELAY IN EXECUTION WHICH RESULTED FROM DEFENDANT'S PARTICIPATION IN THE BIDDING.

PLAINTIFF'S PURCHASING AGENT SOUGHT TO AVOID THE FORCE OF KEMP V. UNITED STATES, D. C. MD. 1941, 38 F. SUPP. 568, BY TELEPHONING THE DEFENDANT AND ASKING FOR A "VERIFICATION" OF THE BID AND BY HAVING IT "CONFIRMED" BY TELEPHONE AND LETTER FROM DEFENDANT'S PRESIDENT. PLAINTIFF, HOWEVER, DID NOT PUT DEFENDANT ON NOTICE OF THE MISTAKE WHICH IT SURMISED. REAFFIRMATION OF THE BID UNDER THESE CIRCUMSTANCES DOES NOT BAR THE DEFENSE OF RESCISSION.

DEFENDANT'S MOTION FOR SUMMARY JUDGMENT IS GRANTED.

THE BASIC FACTS IN THE PRESENT CASE ARE SIMILAR TO THOSE IN THE METRO CASE IN THAT IN EACH OF THE CASES THE LOW BIDDER QUOTED APPROXIMATELY ONE- HALF OF THE PRICE QUOTED BY THE NEXT-LOWEST BIDDER; THAT, BECAUSE THE CONTRACTING OFFICER SUSPECTED AN ERROR IN THE BID, EACH BIDDER WAS REQUESTED BY TELEPHONE TO VERIFY ITS BID; AND THAT, AFTER VERIFICATION AND AWARD, EACH BIDDER ALLEGED AN ERROR IN ITS BID. ALSO IT IS NOW REPORTED IN A MEMORANDUM DATED MARCH 24, 1955, FROM THE OFFICE OF THE QUARTERMASTER GENERAL TO THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, AS FOLLOWS:

IT SHOULD BE NOTED IN THIS CONNECTION THAT INVITATION FOR BIDS NO. QM 80- 280-53-932 WAS OPENED ON 12 MAY 1953, 2 DAYS PRIOR TO THE REQUEST FOR VERIFICATION FROM FOILCRAFT. AS A RESULT OF NOTING A POSSIBLE ERROR ON FOILCRAFT'S BID ON 14 MAY 1953 THE CONTRACTING OFFICER REQUESTED A VERIFICATION FROM THE KENNEDY CAR LINER AND BAG CO., LOW BIDDER UNDER I/B QM-932 IN SUBSTANTIALLY THE SAME LANGUAGE AS USED IN THE REQUEST TO FOILCRAFT. KENNEDY CAR ALLEGED A MISTAKE ON 18 MAY 1953 AND ASKED TO HAVE ITS BID DISREGARDED. FOILCRAFT, HOWEVER, IN REPLY TO THE REQUEST FOR VERIFICATION OF ITS BID OF 14 MAY 1953 CONFIRMED ITS BID. IT IS TRUE, HOWEVER, THAT INFORMATION CONCERNING THE MISTAKE ALLEGED BY KENNEDY CAR LINER AND BAG CO., WAS NOT INCLUDED IN THE CONTRACTING OFFICER'S REPORT TO THE COMPTROLLER GENERAL ON 10 JULY 1953. KENNEDY'S MISTAKE AND THE CIRCUMSTANCES OF ITS DISCOVERY MAY HAVE SOME RELEVANCE WITH RESPECT TO THE CONTRACTING OFFICER'S DUTY, IF ANY, TO GO BEHIND FOILCRAFT'S VERIFICATION.

GENERALLY, WHEN A BIDDER IS REQUESTED TO AND DOES VERIFY HIS BID, THE SUBSEQUENT ACCEPTANCE OF THE BID CONSUMMATES A VALID AND BINDING CONTRACT. SEE 18 COMP. GEN. 942 AND 27 ID.17. IN THE PRESENT CASE, HOWEVER, THE RECORD NOW INDICATES THAT, ALTHOUGH FOILCRAFT WAS ASKED WHETHER THE ITEM OFFERED MET THE TWO SPECIFICATIONS CITED IN THE INVITATION, THE CONTRACTING OFFICER AT THE TIME OF THE AWARD NOT ONLY SUSPECTED AN ERROR IN THE CORPORATION'S BID BUT SURMISED THAT THE BID WAS BASED ON MATERIAL MEETING ONLY ONE OF THE SPECIFICATIONS, AS WAS THE BID OF THE KENNEDY CAR LINER AND BAG COMPANY. IN THESE CIRCUMSTANCES, THERE APPEARS TO BE SERIOUS DOUBT THAT THE REQUEST FOR VERIFICATION AS MADE DID IN FACT MEET THE STANDARD REQUIRED BY THE METRO CASE. CONSIDERING THIS ALONG WITH THE FACT THAT A NUMBER OF OTHER BIDDERS UNDER SUBSEQUENT SIMILAR INVITATIONS APPARENTLY MADE THE SAME TYPE OF ERROR IN THEIR BIDS, WHICH INDICATES THAT THE SPECIFICATIONS COULD BE HELD TO HAVE BEEN AMBIGUOUS OR MISLEADING, AS ALLEGED BY FOILCRAFT, WE WOULD NOT FEEL WARRANTED IN ADHERING TO THE CONCLUSION THAT THE PURPORTED ACCEPTANCE OF THE LOW BID OF FOILCRAFT DID RESULT IN A VALID AND BINDING CONTRACT.

THE INDEBTEDNESS REPORTED AGAINST FOILCRAFT, THEREFORE, SHOULD BE CANCELED AND ANY AMOUNTS WITHHELD FROM THE CORPORATION ON ACCOUNT OF THE EXCESS COST SHOULD BE PAID TO IT. ..END :