B-125234, SEP. 20, 1955

B-125234, SEP. 20, 1955

TO MR. JAMES N. O-NEIL, CHIEF PURCHASING AGENT, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 12, 1955, REQUESTING ADVICE CONCERNING CERTAIN CLAIMS OF THE ZEUGER MILK COMPANY, PITTSBURGH, PENNSYLVANIA, FOR INCREASES IN THE UNIT PRICES ON DAIRY PRODUCTS REQUIRED FOR DELIVERY DURING THE CURRENT FISCAL YEAR TO THREE VETERANS ADMINISTRATION HOSPITALS AT BUTLER AND PITTSBURGH, PENNSYLVANIA, UNDER CONTRACTS NOS. V5242P-78, V5175P-320 AND V5243P 76, AWARDED PURSUANT TO INVITATIONS NOS. 56-5, 56-6 AND 56-14.

THE AWARDS WERE MADE TO THE ZEUGER MILK COMPANY ON THE BASIS THAT IT HAD SUBMITTED THE LOWEST AGGREGATE BIDS ON THE SEVEN ITEMS OF INVITATION NO. 56-5, ON THE SEVEN PRIMARY ITEMS OF INVITATION NO. 56-6 AND ON AGGREGATE NO. 4 OF INVITATION NO. 56-14, WHICH COVERS EIGHT OF THE NINE ITEMS LISTED IN THAT INVITATION. UNDER INVITATION NO. 56-5, THE COMPANY'S PRICES AGGREGATED THE SUM OF $73,440 AND THE PRICES OF FIVE OTHER BIDDERS AGGREGATED THE AMOUNTS OF $97,255.50, $97,368, $101,090, $115,638, AND $115,674. UNDER INVITATION NO. 56-6, THE COMPANY'S PRICES AGGREGATED THE SUM OF $43,748, AND THE PRICES OF FOUR OTHER BIDDERS AGGREGATED THE AMOUNTS OF $46,900.40, $67,745.60, $67,830.40, AND $68,030.40. AGGREGATE NO. 4 OF INVITATION NO. 56 14, THE PRICES QUOTED BY THE ZEUGER MILK COMPANY TOTALED THE SUM OF $69,640.04 AND FIVE OTHER BIDDERS QUOTED PRICES TOTALING THE AMOUNTS OF $84,481.88, $94,147.51, $96,649.62, $111,010.96, AND $117.975.84.

IT IS STATED IN YOUR LETTER THAT, AFTER THE PLANT AND EQUIPMENT OF THE BIDDER WERE INSPECTED AND CONTRACTS AWARDED, MR. BERNDT OF THE ZEUGER MILK COMPANY REQUESTED A CONFERENCE WITH THE THREE SUPPLY OFFICERS CONCERNED; THAT THE MATTER OF PRICES WAS DISCUSSED AT THE MEETING AND NONE OF THE SUPPLY OFFICERS FELT THAT THERE WAS ANY REASON TO BELIEVE THAT AN ERROR HAD BEEN MADE BY THE LOW BIDDER, NAMELY, THE ZEUGER MILK COMPANY; THAT THE COMPANY HAS FAILED TO SUBMIT CERTIFICATES AS REQUIRED BY THE "SPECIAL CONDITIONS" OF THE INVITATION; AND THAT, WHILE TWO OF THE CONTRACTS REQUIRED THE SUBMISSION OF PERFORMANCE BONDS, THEY HAVE NOT BEEN FURNISHED.

IN THREE SEPARATE LETTERS DATED JULY 23, 1955, PRICE ADJUSTMENTS WERE CLAIMED IN CONNECTION WITH REQUIRED DELIVERIES OF MILK AND BUTTERMILK IN HALF-PINT CONTAINERS UNDER THE THREE CONTRACTS AND IN CONNECTION WITH REQUIRED DELIVERIES OF CREAM, HALF AND HALF, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56-6. ON THOSE ITEMS, AND FOR DELIVERIES OF MILK AND BUTTERMILK IN LARGER CONTAINERS, THE CONTRACTOR QUOTED THE FOLLOWING PRICES: CHART

INVITATION NO. 56-5 MILK, PASTEURIZED, IN GALLON CONTAINERS, 7,200 GALLONS

AT $0.66 PER GALLON $4,752.00 MILK, PASTEURIZED, HOMOGENIZED, IN 1/2 PINT CONTAINERS,

1,200,000 HALF PINTS AT $0.0475 PER HALF PINT 57,000.00 BUTTERMILK, CULTURED, IN 1/2 PINT CONTAINERS, 45,000

HALF PINTS AT $0.024 PER HALF PINT 1,080.00

INVITATION NO. 56-6

------------------- CREAM, PASTEURIZED, HOMOGENIZED, HALF AND HALF, IN

QUART CONTAINERS, 3,200 GALLONS AT $1.55 PER GALLON 4,960.00 MILK, PASTEURIZED, HOMOGENIZED, IN 1/2 PINT CONTAINERS,

46,000 GALLONS AT $0.755 PER GALLON 34,730.00 MILK, PASTEURIZED, HOMOGENIZED, IN QUART CONTAINERS,

3,600 GALLONS AT $0.76 PER GALLON 2,736.00 BUTTERMILK, CULTURED, IN QUART CONTAINERS, 400

GALLONS AT $0.40 PER GALLON160.00 BUTTERMILK, CULTURED, IN 1/2 PINT CONTAINERS, 1,900

GALLONS AT $0.42 PER GALLON 798.00

INVITATION NO. 56-14

-------------------- MILK, PASTEURIZED, IN TWO QUART CONTAINERS, 3,288

CONTAINERS AT $0.35 PER CONTAINER 1,150.80 MILK, PASTEURIZED, HOMOGENIZED, 1,024,192 HALF

PINTS AT $0.0475 PER HALF PINT 48,649.12 BUTTERMILK, CULTURED, IN 1/2 PINT CONTAINERS,

44,320 HALF PINTS AT $0.03 PER HALF PINT 1,329.06

THE ABSTRACT OF BIDS IN THE CASE OF INVITATION NO. 56-5 DISCLOSES THAT, AS COMPARED WITH THE CONTRACTOR'S UNIT PRICES OF $0.66, $0.0475, AND $0.024, THE FIVE OTHER COMPLETE BIDS CONTAINED QUOTATIONS OF $0.72, $0.82, $0.86, $0.86, AND $0.8833 PER GALLON FOR PASTEURIZED MILK IN GALLON CONTAINERS; $0.0625, $0.0633, $0.0660, $0.075, AND $0.075, PER HALF PINT OF PASTEURIZED, HOMOGENIZED MILK; AND $0.0260, $0.0425, $0.0615, $0.065 AND $0.065 PER HALF PINT OF BUTTERMILK.

AS COMPARED WITH THE CONTRACTOR'S UNIT PRICES OF $1.55, $0.755, $0.76, $0.40, AND $0.42, QUOTED UNDER INVITATION NO. 56-6, THE ABSTRACT OF BIDS SHOW THAT THE FOUR OTHER COMPLETE BIDS CONTAINED PRICE QUOTATIONS OF $1.92, $2.12, $2.12, AND $2.20 PER GALLON FOR CREAM, HALF AND HALF, DELIVERED IN QUART CONTAINERS; $0.80, $1.20, $1.20, AND $1.20 PER GALLON FOR HALF-PINT DELIVERIES OF MILK; $0.61, $0.86, $0.86, AND $0.86 PER GALLON OF MILK DELIVERED IN QUART CONTAINERS; $0.50, $0.70, $0.70, $0.70 PER GALLON FOR BUTTERMILK IN QUART CONTAINERS; AND $0.62, $1.04, $1.04, AND $1.04 PER GALLON FOR BUTTERMILK DELIVERED IN HALF-PINT CONTAINERS.

THE ABSTRACT OF THE BIDS RECEIVED IN RESPONSE TO INVITATION NO. 56 14 DOES NOT SHOW THE UNIT PRICES QUOTED BY THE BIDDERS, BUT THE CONTRACTOR HAS ALLEGED THAT THE MEADOW GOLD DAIRY COMPANY QUOTED A PRICE OF $0.0599 PER HALF PINT OF MILK AND THAT THIS WAS THE NEXT LOWEST BID PRICE ON THAT ITEM OF THE INVITATION.

THE CONTRACTOR HAS CLAIMED AN INCREASE FROM $1.55 TO $1.90 PER GALLON IN THE PRICE FOR DELIVERIES OF CREAM, HALF AND HALF, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56-6; AN INCREASE OF $0.015 IN THE PRICES FOR HALF PINTS OF MILK AND BUTTERMILK DELIVERED UNDER THE THREE CONTRACTS FROM JULY 1, TO JULY 23, 1955; INCREASES FROM $0.0475 TO $0.0625, AND FROM $0.024 TO $0.0425 IN THE PRICES FORHALF PINTS OF MILK AND BUTTERMILK DELIVERED SUBSEQUENT TO JULY 23, 1955, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56-5; INCREASES FROM $0.755 TO $1.075 AND FROM $0.42 TO $0.74 IN THE GALLON PRICES FOR HALF PINTS OF MILK AND BUTTERMILK DELIVERED SUBSEQUENT TO JULY 23, 1955, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56-6; AND INCREASES FROM $0.0475 TO $0.0625 AND FROM $0.03 TO $0.045 IN THE PRICES FOR HALF PINTS OF MILK AND BUTTERMILK DELIVERED SUBSEQUENT TO JULY 23, 1955, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56-14.

THE CONTRACTOR HAS FURNISHED NO INFORMATION RELATIVE TO ITS CLAIM FOR AN INCREASE IN THE AGREED PRICE OF $1.55 PER GALLON FOR DELIVERIES OF CREAM, HALF AND HALF, UNDER THE CONTRACT AWARDED PURSUANT TO INVITATION NO. 56- 6. HOWEVER, WITH RESPECT TO THE PRICE INCREASES CLAIMED FOR DELIVERIES OF HALF PINTS OF MILK AND BUTTERMILK, AN ATTEMPT IS MADE TO SHOW THAT THE CONTRACTS WERE ENTERED INTO AS THE RESULT OF MUTUAL MISTAKES.

IN THE CASE OF INVITATION NO. 56-5, THE CONTRACTOR COMPARES ITS PRICES OF $0.66 PER GALLON, FOR MILK TO BE DELIVERED IN GALLON CONTAINERS, WITH ITS PRICE OF $0.0475 PER HALF PINT OF MILK AND STATES THAT "THE COST OF THE HALF PINT PAPER CONTAINERS AMOUNT TO 2 CENTS EACH OR 32 CENTS, LEAVING 44 CENTS PER GALLON OF MILK AFTER DEDUCTING THE COST OF THE CONTAINER OR A DIFFERENCE OF 22 CENTS PER GALLON.' ALSO, A REFERENCE IS MADE TO THE BID OF THE HARMONY DAIRY COMPANY, THE SECOND LOWEST AGGREGATE BIDDER, WHICH COMPANY QUOTED A PRICE OF $0.82 PER GALLON FOR MILK DELIVERED IN GALLON CONTAINERS, A PRICE OF $0.0625 PER HALF PINT OF MILK AND A PRICE OF $0.0425 PER HALF PINT OF BUTTERMILK. WITH PARTICULAR REFERENCE TO ITS BID PRICE OF $0.024 PER HALF PINT OF BUTTERMILK, THE CONTRACTOR STATES THAT "A HALF PINT OF MILK OR BUTTERMILK HAS THE FOLLOWING COSTS: 2 CENTS FOR THE PACKAGE, 3/4 CENTS FOR DELIVERY COSTS, AND 3/4 CENTS FOR OVERHEAD, MAKING A TOTAL OF 3 1/2 CENTS PER HALF PINT; " AND THAT "THESE ITEMS ARE WELL KNOWN TO THE VETERANS ADMINISTRATION.'

IN THE CASES OF INVITATION NOS. 56-6 AND 56-14, SIMILAR STATEMENTS ARE MADE CONCERNING THE COSTS OF FURNISHING MILK OR BUTTERMILK IN HALF PINT CONTAINERS. IN REGARD TO INVITATION NO. 56-6, ATTENTION WAS INVITED TO THE CONTRACTOR'S PRICE OF $0.755 PER GALLON FOR DELIVERY OF MILK IN HALF- PINT CONTAINERS, $0.76 PER GALLON FOR DELIVERY OF MILK IN QUART CONTAINERS, $0.42 PER GALLON FOR BUTTERMILK DELIVERED IN HALF PINT CONTAINERS AND $0.40 PER GALLON FOR BUTTERMILK DELIVERED IN QUART CONTAINERS; AND THESE PRICES ARE COMPARED WITH THE PRICES OF $1.20, $0.86, $1.04, AND $0.70 PER GALLON QUOTED ON THE SAME ITEMS BY THE HARMONY DAIRY COMPANY. RELATIVE TO INVITATION NO. 56-14, THE CONTRACTOR SETS FORTH ITS PRICES OF $0.0475 PER HALF PINT OF MILK, AND $0.03 PER HALF PINT OF BUTTERMILK, BUT REFERS ONLY TO ONE OTHER BID PRICE, THAT OF $0.0599 PER HALF PINT OF MILK WHICH IS ALLEGED TO HAVE BEEN QUOTED BY THE MEADOW GOLD DAIRY COMPANY.

THERE IS NOTHING OF RECORD TO INDICATE THAT EITHER OF THE SUPPLY OFFICERS HAD ANY SPECIFIC INFORMATION RELATING TO THE CONTRACTOR'S PRESENTLY ALLEGED COSTS OF FURNISHING MILK AND BUTTERMILK IN HALF-PINT CONTAINERS. NOR DOES ANY INDICATION OF ERROR APPEAR ON THE FACE OF EITHER OF THE BIDS SUBMITTED BY THE CONTRACTOR.

ON INVITATION NO. 56-5 THE CONTRACTOR HAD MADE WHAT APPEARS TO HAVE BEEN AN APPROPRIATE ALLOWANCE ($0.10 PER GALLON) FOR THE DIFFERENCE BETWEEN THE COST OF FURNISHING MILK IN GALLON CONTAINERS AND THE COST OF FURNISHING MILK IN HALF-PINT CONTAINERS, AND ON INVITATION NO. 56 14 A SIMILAR APPROPRIATE ALLOWANCE APPEARS TO HAVE BEEN MADE WHEN THE CONTRACTOR QUOTED A PRICE OF $0.35 FOR TWO-QUART DELIVERIES OF MILK, AND A PRICE OF $0.0475 PER HALF PINT OF MILK.

ON INVITATION NO. 56-6 THE CONTRACTOR HAD SHOWN, IN CONNECTION WITH ITS BID PRICES ON BUTTERMILK DELIVERIES, THAT CONSIDERATION HAD BEEN GIVEN TO THE DIFFERENCE BETWEEN THE COST OF FURNISHING QUART PAPER CONTAINERS AND THAT OF FURNISHING A GREATER NUMBER PER GALLON OF HALF PINT CONTAINERS, AND, APPARENTLY, SUCH COST DIFFERENTIAL WAS NOT FOUND SO GREAT AS TO REQUIRE ANY CONSIDERABLE DIFFERENCE BETWEEN THE PRICES PER GALLON QUOTED FOR HALF-PINT AND QUART DELIVERIES OF MILK. HENCE, IN REGARD TO THE LATTER INVITATION, WHEN CONSIDERED WITH THE FACT THAT DELIVERIES OF HALF PINTS OF MILK CONSTITUTED THE MAJOR ITEM, THE SUPPLY OFFICER COULD WELL HAVE ASSUMED THAT THE CONTRACTOR FULLY INTENDED TO QUOTE THE PRICE OF $0.755 PER GALLON ON DELIVERIES MADE IN HALF-PINT CONTAINERS EVEN THOUGH SUCH PRICE WAS SLIGHTLY LESS THAN ITS PRICE PER GALLON FOR DELIVERIES OF MILK IN QUART PAPER CONTAINERS.

SO FAR AS COMPARISONS WITH THE PRICES QUOTED BY THE OTHER BIDDERS ARE CONCERNED, IT IS INTERESTING TO NOTE THAT THE CONTRACTOR MAKES NO REFERENCE TO THE PRICE OF $0.026, QUOTED BY THE MEADOW GOLD DAIRY COMPANY FOR DELIVERIES OF HALF PINTS OF BUTTERMILK AS REQUIRED UNDER INVITATION NO. 56-5, OR TO THAT COMPANY'S GALLON PRICES OF $0.61, $0.80, $0.50, AND $0.62 FOR MILK AND BUTTERMILK DELIVERIES AS REQUIRED UNDER INVITATION NO. 56-5. THESE PRICES INDICATE THAT, DEPENDING UPON THE TYPE OF THE BIDDER'S ORGANIZATION AND METHODS OF DOING BUSINESS, A LOW BIDDER MIGHT REASONABLY QUOTE AVERAGE PRICES OF APPROXIMATELY $0.75 AND $0.40 PER GALLON FOR THE SPECIFIED QUANTITIES OF MILK AND BUTTERMILK TO BE DELIVERED IN HALF-PINT AND IN LARGER CONTAINERS.

SIGNIFICANTLY, THE CONTRACTOR ALSO MAKES NO REFERENCE TO ITS PRICE OF $0.09 PER HALF PINT OF CREAM, HALF AND HALF, QUOTED UNDER INVITATION NO. 56-5; ITS PRICE OF $0.085 PER HALF PINT OF CREAM, HALF AND HALF, QUOTED UNDER INVITATION NO. 56-14; OR TO ITS PRICE OF $0.03 PER HALF PINT OF SKIMMED MILK QUOTED UNDER INVITATION NO. 56-14. AT THE PRICES OF $0.09 AND $0.085, THE TOTAL PRICES PER GALLON OF CREAM, HALF AND HALF, WOULD EQUAL THE AMOUNTS OF $1.44 AND $1.36, OR CONSIDERABLY LESS THAN THE GALLON PRICE OF $1.55 QUOTED UNDER INVITATION NO. 56-6 FOR DELIVERY OF THE SAME COMMODITY IN QUART PAPER CONTAINERS. CERTAINLY, THE CLAIM FOR AN INCREASE IN THE PRICE OF $1.55 IS INCONSISTENT WITH THE PRICES OF $0.085 AND $0.09 PER HALF PINT OF CREAM, HALF AND HALF, PARTICULARLY IF WE ARE TO ASSUME THAT DELIVERY IN HALF-PINT CONTAINERS WOULD INVOLVE A COST CONSIDERABLY IN EXCESS OF THAT FOR DELIVERY IN QUART CONTAINERS.

FURTHER, IT IS APPARENT THAT THE COST OF THE CONTAINER, DELIVERY AND OVERHEAD COSTS, INVOLVED IN MAKING DELIVERY OF SKIMMED MILK IN HALF-PINT CONTAINERS WOULD BE PRACTICALLY THE SAME AS THE COSTS INVOLVED IN THE MAKING OF DELIVERIES OF MILK OR BUTTERMILK IN HALF PINT CONTAINERS. HOWEVER, THE CONTRACTOR ASSERTS NO CLAIM FOR AN ADJUSTMENT IN THE PRICE OF $0.03 PER HALF PINT OF SKIMMED MILK, BUT CONTENDS THAT ITS SAME PRICE FOR DELIVERY OF BUTTERMILK IN HALF-PINT CONTAINERS SHOULD BE ADJUSTED ON THE BASIS OF THE ALLEGATION THAT THE COST OF THE CONTAINER, DELIVERY AND OVERHEAD COSTS, EXCEEDED SUCH PRICE. THE ABOVE PRICES AND OTHER PRICES QUOTED BY THE ZEUGER MILK COMPANY SHOW THAT IT CONSISTENTLY QUOTED EXCEPTIONALLY LOW PRICES AND A MERE COMPARISON OF THE BIDS RECEIVED UNDER EITHER INVITATION FOR BIDS WOULD NOT, THEREFORE, BE SUFFICIENT TO SUGGEST THAT THE COMPANY ACTUALLY MADE ANY MISTAKE IN ITS BID OR TO WARRANT THE CONCLUSION THAT ANY SUCH MISTAKE, IF MADE, WAS SO APPARENT THAT THE SUPPLY OFFICER SHOULD BE PRESUMED TO HAVE KNOWN OF THE MISTAKE AND SOUGHT TO TAKE ADVANTAGE OF IT. AS POINTED OUT IN 29 COMP. GEN. 323, THE PRIMARY QUESTION IS NOT WHETHER THE BIDDER MADE THE ALLEGED MISTAKES, BUT WHETHER VALID AND BINDING CONTRACTS WERE CONSUMMATED BY THE ACCEPTANCE OF THE BIDS. THERE WAS NOTHING IN THE BIDS OF ZEUGER MILK COMPANY TO INDICATE THAT MISTAKES WERE MADE AND NO ALLEGATION OF ERROR WAS MADE UNTIL AFTER THE AWARDS. THE BIDDER HAS NOT SHOWN THAT ITS BID PRICES WERE NOT AS INTENDED AND HAS PRESENTED NO CONVINCING EVIDENCE THAT ANY ERRORS, IN FACT, WERE MADE. IT WOULD SEEM THAT THE COMPANY BELIEVES THAT SOME ADJUSTMENTS WOULD BE IN ORDER MERELY BECAUSE IT MIGHT HAVE QUOTED HIGHER PRICES AND STILL HAVE QUALIFIED AS THE LOWEST AGGREGATE BIDDER. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT NO ADJUSTMENTS SHOULD BE MADE IN THE CONTRACT PRICES AND THAT THE CONTRACT PROVISIONS, INCLUDING THE REQUIREMENTS THAT HEALTH CERTIFICATES AND PERFORMANCE BONDS BE FURNISHED, SHOULD BE STRICTLY ENFORCED.