B-124792, OCT. 13, 1955

B-124792, OCT. 13, 1955

TO THE HONORABLE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF JULY 20, 1955, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER VAMCO MACHINE AND TOOL, INC., MAY BE RELIEVED OF ITS OBLIGATIONS UNDER CONTRACT NO. DA-36-038-ORD-17021, DATED NOVEMBER 18, 1953, ON THE BASIS OF MUTUAL MISTAKE.

THE FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA, BY INVITATION NO. ORD- 36-038-54-G-366, REQUESTED BIDS FOR THE MANUFACTURE AND DELIVERY OF TEN ITEMS OF ADAPTER GAGES IN ACCORDANCE WITH THE GOVERNMENT'S DRAWINGS. RESPONSE, VAMCO MACHINE AND TOOL, INC., SUBMITTED A BID DATED OCTOBER 19, 1953, OFFERING TO FURNISH, AMONG OTHERS, THE GAGES SPECIFIED UNDER ITEMS 1, 2, 3, 4, 6, 7, 9, AND 10 AT UNIT PRICES OF $80 EACH. THE SIX OTHER BIDDERS ON THE GAGES QUOTED UNIT PRICES OF $235, $265, $360, $580, $665, AND $1,500, RESPECTIVELY. THE GOVERNMENT'S ESTIMATE OF THE COST OF THE GAGES WAS $600 EACH.

UPON BEING REQUESTED TO CONFIRM ITS BID PRICES ON THE GAGES, VAMCO MACHINE AND TOOL, INC., ADVISED BY TELEGRAM DATED NOVEMBER 9, 1953, THAT THE PRICES QUOTED BY IT WERE CORRECT. THE RECORD INDICATES THAT, ON THE SAME DAY THE CORPORATION WAS REQUESTED TO VERIFY ITS BID PRICE, THE CONTRACTING OFFICER REQUESTED THE PITTSBURGH ORDNANCE DISTRICT BY TELETYPE DATED NOVEMBER 6, 1953, TO CONDUCT A PRE-AWARD SURVEY OF THE ABILITY OF VAMCO MACHINE AND TOOL, INC., TO PERFORM THE CONTRACT, AND THAT BY TELETYPE DATED NOVEMBER 12, 1953, THE PITTSBURGH ORDNANCE DISTRICT ADVISED THE CONTRACTING OFFICER THAT A SURVEY REVEALED THAT THE CORPORATION WAS TECHNICALLY, FINANCIALLY AND MECHANICALLY CAPABLE OF PRODUCING THE PROPOSED CONTRACT. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEMS 1, 2, 3, 4, 6, 7, 9, AND 10 ON NOVEMBER 18, 1953.

BY LETTER DATED FEBRUARY 18, 1954, VAMCO MACHINE AND TOOL, INC., ADVISED THAT AFTER STARTING PRODUCTION OF THE REQUIRED GAGES IT DISCOVERED THAT IT HAD MISINTERPRETED THE CONTRACT DRAWINGS AND HAD BASED ITS BID ON A TOLERANCE OF .005 INCH, WHEREAS AN EXACTING TOLERANCE OF .0001 WAS REQUIRED WHICH, IT STATED, COULD ONLY BE OBTAINED UNDER ATMOSPHERICALLY CONTROLLED CONDITIONS WITH PRECISION EQUIPMENT WHICH IT DID NOT POSSESS. THE CORPORATION REQUESTED THAT THE CONTRACT BE RESCINDED ON THE GROUND OF THE WIDE VARIANCE BETWEEN THE AMOUNT BID BY IT AND THE AMOUNTS BID BY THE OTHER BIDDERS AND THE AMOUNT OF THE GOVERNMENT'S ESTIMATE. IT IS REPORTED THAT AN INVESTIGATION CONDUCTED ON JANUARY 26, 1954, REVEALED THAT THE CONTRACTOR DID NOT POSSESS THE NECESSARY EQUIPMENT FOR THE MANUFACTURE OF THE REQUIRED GAGES.

AT A CONFERENCE HELD ON MARCH 26, 1954, A REPRESENTATIVE OF VANCE MACHINE AND TOOL, INC., VERBALLY ADVISED REPRESENTATIVES OF THE SUCCESSOR CONTRACTING OFFICER THAT THE CORPORATION COULD NOT PERFORM UNDER THE CONTRACT; BY LETTER DATED MARCH 30, 1954, THE SUCCESSOR CONTRACTING OFFICER ADVISED THE CORPORATION THAT PURSUANT TO ARTICLE 11 OF THE CONTRACT ITS RIGHT TO PROCEED WITH THE PERFORMANCE OF THE CONTRACT FOR THE SAME GAGES WAS ENTERED INTO WITH ANOTHER COMPANY AT AN EXCESS COST OF $8,464.40 TO THE GOVERNMENT.

IT APPEARS THAT REPRESENTATIVES OF THE CORPORATION CONTEND THAT THE MANNER IN WHICH THE SPECIAL TOLERANCE OF .0001 WAS SPECIFIED ON THE DRAWINGS--- IN A NOTE AT THE TOP OF THE DRAWINGS--- MADE IT EASY FOR THE CORPORATION TO OVERLOOK THIS REQUIREMENT IN EXAMINING THE DRAWINGS AND PREPARING ITS BID IN THE COMPARATIVELY SHORT TIME AVAILABLE TO IT FOR PREPARATION AND SUBMISSION OF ITS BID. IN THIRD INDORSEMENT DATED MARCH 16, 1954, THE INSPECTOR WHO CONDUCTED THE PRE-AWARD SURVEY OF THE PLANT AND FACILITIES OF VAMCO MACHINE AND TOOL, INC., STATED THAT AT THE TIME HE DISCUSSED WITH THE PRESIDENT OF THE CORPORATION THE REQUIREMENTS AS TO TOLERANCES ON THE DRAWINGS INVOLVED, THE OVERALL TOLERANCES WERE THE SUBJECT OF DISCUSSION RATHER THAN THE SPECIAL TOLERANCE OF .0001.

WHILE IT APPEARS THAT PRIOR TO AWARD THE CORPORATION CONFIRMED ITS BID PRICES ON THE GAGES, IT DOES NOT APPEAR THAT IN REQUESTING CONFIRMATION THE CONTRACTING OFFICER GAVE ANY INDICATION OF THE REASONS WHICH LED HIM TO SUSPECT AN ERROR, OR THAT THE BIDDER'S ATTENTION WAS SPECIFICALLY DIRECTED TO THE TOLERANCES. IT MAY BE QUESTIONED WHETHER IN THOSE CIRCUMSTANCES THE BARE CONFORMATION OF THE PRICE WAS SUFFICIENT TO OVERCOME THE DOUBT RAISED BY THE WIDE DISCREPANCY IN PRICE. THE CONTRACTING OFFICER WAS ENTITLED TO RELY UPON PITTSBURGH ORDNANCE DISTRICT'S DETERMINATION THAT THE CORPORATION WAS TECHNICALLY, FINANCIALLY AND MECHANICALLY CAPABLE OF PRODUCING THE REQUIRED GAGES, BUT, SINCE IT HAS BEEN DETERMINED THAT SUCH DETERMINATION WAS ERRONEOUS, THERE IS SOME GROUND FOR CONSIDERING THE GOVERNMENT TO HAVE BEEN AS MUCH AT FAULT AS THE BIDDER.

IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CONTRACT WAS NOT LEGALLY ENFORCEABLE. IT FOLLOWS THAT THE INDEBTEDNESS FOR EXCESS COSTS STATED AGAINST VAMCO MACHINE AND TOOL, INC., SHOULD BE CANCELED.

THE PAPERS WITH THE EXCEPTION OF CARBON COPIES OF THE SUCCESSOR CONTRACTING OFFICER'S REPORTS OF NOVEMBER 16, 1954, AND FEBRUARY 14, 1955, ARE RETURNED.