B-126828, FEB. 10, 1956

B-126828, FEB. 10, 1956

TO THE HONORABLE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED JANUARY 27, 1956, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL), RELATIVE TO AN ERROR ALLEGED BY THE GEORGE SALL METALS COMPANY, INC., PHILADELPHIA, PENNSYLVANIA, TO HAVE BEEN MADE IN ITS UNDATED BID, ON WHICH CONTRACT NO. N151S-2986A IS BASED.

BY INVITATION NO. B-29-56 DATED OCTOBER 3, 1955, THE PHILADELPHIA NAVAL SHIPYARD NAVAL BASE REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF SURPLUS EQUIPMENT LOCATED AT THE SCHUYLKILL ARSENAL, PHILADELPHIA, PENNSYLVANIA. IN RESPONSE TO THE INVITATION THE GEORGE SALL METALS COMPANY SUBMITTED A BID, ACCOMPANIED BY A DEPOSIT OF $4,000, OFFERING TO PURCHASE, AMONG OTHERS, LOTS 628, 630, AND 631, CONSISTING OF BRASS, BRONZE, AND COPPER PIPE FITTINGS, AT UNIT PRICES OF $1.16, $1.38 AND $1.12 EACH, RESPECTIVELY. ON LOT 628, TWENTY-FIVE OTHER BIDS WERE RECEIVED WHICH RANGED IN PRICE FROM ?6050 TO ?0017 EACH; ON LOT 630, SEVENTEEN OTHER BIDS WHICH RANGED IN PRICE FROM ?3070 TO ?005 EACH; AND ON LOT 631 TWENTY-THREE OTHER BIDS RANGING FROM .4320 TO ?005 EACH.

THE CONTRACTING OFFICER REPORTS THAT THE BIDS WERE OPENED ON OCTOBER 22, 1955, AND THAT THE NEXT DAY, BEFORE AWARDS HAD BEEN MADE, THE SALL COMPANY'S REPRESENTATIVE INFORMED THE CONTRACTING OFFICER OF ALLEGED ERRORS IN ITS BID. THE CONTRACTING OFFICER, ON THE BASIS OF THE CURRENT MARKET, SPREAD OF BIDS RECEIVED, AND HIS KNOWLEDGE OF THE CONTRACTOR'S BUSINESS (SMELTING AND INGOT MAKING), AGREED THAT ERRORS HAD PROBABLY OCCURRED, AND THE CONTRACTOR WAS REQUESTED TO SUBMIT PROOF OF ITS ALLEGATIONS. INADVERTENTLY, HOWEVER, A CONTRACT WAS PREPARED, SIGNED AND FORWARDED ON NOVEMBER 15, 1955, PRIOR TO RECEIPT OF ANY STATEMENT FROM THE CONTRACTOR. BY LETTER DATED NOVEMBER 18, 1955, THE CONTRACTOR CONFIRMED ITS CLAIM OF ERROR, STATING THAT IT HAD INADVERTENTLY PUT A "1" IN FRONT OF THE DECIMAL POINT ON LOTS 628, 630 AND 631, HAVING INTENDED TO BID ?16, ?38, AND ?12 EACH FOR THE RESPECTIVE UNITS. THE CONTRACTING OFFICER STATES THAT IT IS HIS OPINION THAT THE SUBJECT ITEMS SHOULD BE WITHDRAWN FOR RESALE AT A FUTURE DATE AND THAT THE BID DEPOSIT SHOULD BE REFUNDED.

IT IS AN ESTABLISHED RULE THAT THE ACCEPTANCE OF A BID WITH KNOWLEDGE OF AN ERROR DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT. SEE NASON COAL COMPANY V. UNITED STATES, 64 C.CLS. 526; RESTATEMENT OF THE LAW OF CONTRACTS, SECTION 503; AND WILLISTON ON CONTRACTS, SECTION 1578. ALSO, SEE MOFFETT, HODGKINS AND CLARK COMPANY V. ROCHESTER, 178 U.S. 373; KEMP V. UNITED STATES, 38 F.SUPP. 568; ALTA ELECTRIC AND MECHANICAL COMPANY, INC. V. UNITED STATES, 90 C.CLS. 466; AND 17 COMP. GEN. 575. THEREFORE, SINCE THE GOVERNMENT WAS IN RECEIPT OF AN ALLEGATION OF ERROR PRIOR TO THE ACCEPTANCE OF THE BID, THE ACCEPTANCE CANNOT BE CONSIDERED EFFECTIVE IF THE CLAIMED ERROR IS ESTABLISHED. THE BIDDER'S CLAIM APPEARS TO BE CORROBORATED BY THE FACT THAT THE BIDS ON LOTS 628, 630 AND 631 WERE APPROXIMATELY DOUBLE, QUADRUPLE AND TRIPLE, RESPECTIVELY, THE AMOUNTS OF THE NEXT HIGHEST BIDS. ALSO, IT IS NOTED THAT THE PRICE QUOTED FOR LOT 630 IS MORE THAN THE GOVERNMENT'S ACQUISITION COST, AND THOSE FOR THE OTHER LOTS BEAR AN UNUSUALLY HIGH RATIO TO ACQUISITION COSTS.

ON THE RECORD BEFORE US, THERE APPEARS TO BE LITTLE, IF ANY, DOUBT THAT AN ERROR WAS MADE BY THE COMPANY AS ALLEGED. THE CONTRACT MAY ACCORDINGLY BE CANCELED WITHOUT LIABILITY AND THE DEPOSIT RETURNED TO THE BIDDER.

THE PAPERS, WITH THE EXCEPTION OF THE CONTRACTING OFFICER'S STATEMENT DATED JANUARY 16, 1956, AND THE CONTRACTOR'S LETTER OF NOVEMBER 18, 1955, ARE RETURNED.