B-125603, OCT. 5, 1955

B-125603: Oct 5, 1955

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TO THE HONORABLE SECRETARY OF THE ARMY: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 21. THE CONTRACTOR WAS THE SUCCESSFUL BIDDER ON ITEMS 21 AND 102 OF THE INVITATION FOR BIDS. NOTICE OF AWARD OF THOSE ITEMS WAS ISSUED TO THE CONTRACTOR ON APRIL 4. THERE WAS SUBSEQUENTLY FORWARDED TO THE CONTRACTOR A FORMAL AWARD DOCUMENT WHICH CONTAINED THE SAME DESCRIPTIONS FOR ITEMS 21 AND 102 AS THOSE SHOWN IN THE INVITATION. THE WORD "ANNEALED" WAS NOT USED BUT THE DESCRIPTION CONTAINS THE PHRASE "REGULAR QUALITY AS ROLLED.'. WHEN THE FORMAL AWARD DOCUMENT WAS RECEIVED THE CONTRACTOR PROMPTLY BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER THE DISCREPANCY BETWEEN THE BID AND THE FORMAL AWARD WITH RESPECT TO ITEM 102.

B-125603, OCT. 5, 1955

TO THE HONORABLE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 21, 1955, RELATIVE TO AN ERRONEOUS AWARD MADE TO THE UNITED STATES STEEL EXPORT COMPANY, 30 CHURCH STREET, NEW YORK, NEW YORK, ON ITEM 102 OF INVITATION NO. DA-ENG 11-184-55 -D-222, ISSUED BY THE CHICAGO PROCUREMENT OFFICE, CORPS OF ENGINEERS.

THE CONTRACTOR WAS THE SUCCESSFUL BIDDER ON ITEMS 21 AND 102 OF THE INVITATION FOR BIDS. NOTICE OF AWARD OF THOSE ITEMS WAS ISSUED TO THE CONTRACTOR ON APRIL 4, 1955, AND THERE WAS SUBSEQUENTLY FORWARDED TO THE CONTRACTOR A FORMAL AWARD DOCUMENT WHICH CONTAINED THE SAME DESCRIPTIONS FOR ITEMS 21 AND 102 AS THOSE SHOWN IN THE INVITATION. HOWEVER, THE CONTRACTOR HAD SUBMITTED A QUALIFIED BID ON ITEM 102 WHICH PROVIDED FOR THE DELIVERY OF 120,000 POUNDS OF "STEEL, NICKEL, CHROMIUM, FLAT BAR, HOT ROLLED AND ANNEALED, AISI-3316, 2 INCHES BY 3 INCHES, 10 TO 12 FOOT LENGTHS.' IN THE CONTRACTOR'S DESCRIPTION OF THE STEEL WHICH IT PROPOSED TO FURNISH UNDER THAT ITEM, THE WORD "ANNEALED" WAS NOT USED BUT THE DESCRIPTION CONTAINS THE PHRASE "REGULAR QUALITY AS ROLLED.'

THE RECORD INDICATES THAT IN DETERMINING THE AWARD ON ITEM 102, THE CONTRACTING OFFICER OVERLOOKED THE FACT THAT THE TERM "REGULAR QUALITY AS ROLLED" DOES NOT INCLUDE ANY ANNEALING PROCESS. APPARENTLY, UPON RECEIPT OF THE NOTICE OF AWARD WHICH AUTHORIZED THE CONTRACTOR "TO PROCEED WITH THE PERFORMANCE OF THIS CONTRACT," THE CONTRACTOR PERFORMED A PART OF THE NECESSARY WORK. WHEN THE FORMAL AWARD DOCUMENT WAS RECEIVED THE CONTRACTOR PROMPTLY BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER THE DISCREPANCY BETWEEN THE BID AND THE FORMAL AWARD WITH RESPECT TO ITEM 102. THE CONTRACTOR ADVISED THAT IT WAS PROCEEDING WITH THE ORDER AS BID AND REQUESTED AN AMENDMENT TO THE CONTRACT IN CONFORMANCE WITH THE BID AS ORIGINALLY ACCEPTED BY THE GOVERNMENT. AFTER CONSIDERABLE DELAY IT WAS FINALLY DETERMINED THAT THERE WAS NO NEED FOR THE STEEL AS BID, WITHOUT ANNEALING. IN THE MEANTIME THE CONTRACTOR HAS PROCEEDED WITH THE WORK TO BILLET FORM OR TO A POINT WHERE THE MANUFACTURING PROCESSES FOR STEEL "REGULAR QUALITY AS ROLLED," DIFFER FROM THOSE FOR STEEL WHICH REQUIRES ANNEALING.

THE RECORD FURTHER INDICATES THAT THE CONTRACTOR HAS TAKEN THE POSITION THAT THE GOVERNMENT WOULD BE LIABLE FOR TERMINATION COSTS IF THE CONTRACT SHOULD BE CANCELED. HOWEVER, THE CONTRACTOR HAS APPARENTLY AGREED TO COMPLETE THE ORDER BY FURNISHING ANNEALED STEEL IF THE GOVERNMENT SHOULD AGREE TO INCREASE THE CONTRACT PRICE FROM $12.225 TO $14.325 PER HUNDRED POUNDS. IN THAT CONNECTION, IT APPEARS THAT THE NEXT LOWEST BID ON ITEM 102 WAS $13.675 PER HUNDRED POUNDS; THAT THE CONTRACTOR'S REGULAR PRICE FOR ANNEALED STEEL AS DESCRIBED IN ITEM 102 OF THE INVITATION WAS DATE, ITS REGULARLY ESTABLISHED PRICE WAS INCREASED TO $14.325 PER $13.825 PER HUNDRED POUNDS PRIOR TO JULY 7, 1955; AND THAT, ON THAT HUNDRED POUNDS.

ALTHOUGH THE AWARD ON ITEM 102 WAS ERRONEOUSLY MADE, WE ARE OF THE OPINION THAT THE FACTS OF THE CASE WARRANT THE CONCLUSION THAT AS OF APRIL 4, 1955, THERE EXISTED A VALID AND BINDING CONTRACT FOR THE FURNISHING OF THE STEEL AS DESCRIBED IN THE CONTRACTOR'S BID. SEE 17 COMP. GEN. 53. ALSO, IT IS EVIDENT THAT IF THE GOVERNMENT SHOULD ELECT TO CHANGE THE REQUIREMENTS OF THE CONTRACT, AN APPROPRIATE ADJUSTMENT IN THE CONTRACT PRICE COULD PROPERLY BE NEGOTIATED PURSUANT TO PARAGRAPH 2 OF THE GENERAL PROVISIONS MADE A PART OF THE GOVERNMENT'S INVITATION FOR BIDS.

ACCORDINGLY, IN SPECIFIC ANSWER TO THE QUESTIONS RAISED IN YOUR LETTER, YOU ARE ADVISED THAT THERE IS PERCEIVED NO OBJECTION TO THE ISSUANCE BY THE CONTRACTING OFFICER OF INSTRUCTIONS TO THE CONTRACTOR TO FURNISH ANNEALED STEEL UNDER ITEM 102 OR TO THE SUBSEQUENT NEGOTIATION OF A FAIR AND REASONABLE PRICE THEREFOR. HOWEVER, AS YOU SUGGEST, IT IS APPARENT THAT SUCH REASONABLE PRICE SHOULD NOT EXCEED THE CONTRACTOR'S PREVAILING PRICE FOR ANNEALED STEEL AT THE TIME OF THE AWARD, PLUS AN ALLOWANCE OF 10 PERCENT PURSUANT TO THE PRICE ESCALATION PROVISION IN THE CONTRACTOR'S ACCEPTED BID.

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