B-128432, JUL. 31, 1956

B-128432, JUL. 31, 1956

TO HONORABLE FRANKLIN G. FLOETE, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER DATED JUNE 27, 1956, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER CONTRACT NO. GS-05S 5508, WITH EUREKA WILLIAMS CORPORATION, CHICAGO, ILLINOIS, MAY BE CANCELLED BY REASON OF AN ERROR WHICH THE CONTRACTOR ALLEGES IT MADE IN ITS BID ON WHICH THE CONTRACT WAS AWARDED.

THE FEDERAL SUPPLY SERVICE, CHICAGO, ILLINOIS, BY INVITATION ISSUED FEBRUARY 5, 1956, REQUESTED BIDS FOR FURNISHING VARIOUS VACUUM CLEANERS TO MEET THE GOVERNMENT'S NEEDS FOR THE PERIOD FROM THE DATE OF ACCEPTANCE THROUGH NOVEMBER 30, 1956. ON ITEM 66-C-740-100, HOUSEHOLD VERTICAL CANISTER TYPE, WITH ATTACHMENTS, ONLY TWO BIDS WERE RECEIVED BY FEBRUARY 1, 1956, THE DATE OF THE BID OPENING. EUREKA WILLIAMS CORPORATION BID A BASE UNIT PRICE OF $41.97 LESS A 40 PERCENT QUANTITY DISCOUNT FOR PURCHASES OF 26 OR MORE, AMOUNTING TO A NET BID OF $25.18 PER UNIT. CLEMENTS MANUFACTURING COMPANY BID A BASE UNIT PRICE OF $36.11 LESS A FIVE PERCENT QUANTITY DISCOUNT FOR PURCHASES OF 26 TO 99, AMOUNTING TO A NET BID OF $34.30, AND LESS A TEN PERCENT QUANTITY DISCOUNT FOR PURCHASES OF 100 OR MORE, AMOUNTING TO A NET BID OF $32.50. ON FEBRUARY 6, 1956, AWARD WAS MADE TO EUREKA WILLIAMS CORPORATION IN ACCORDANCE WITH ITS BID.

BY LETTER DATED MARCH 13, 1956, THE CONTRACTOR ALLEGED AN ERROR IN ITS BID, IN THAT ITS 40 PERCENT QUANTITY DISCOUNT SHOULD HAVE BEEN 10 PERCENT. IT CONTENDED THAT THE BASE PRICE, $41.97, WAS 40 PERCENT OFF ITS LIST PRICE, $69.95, AND THAT ITS ALLOWANCE OF AN ADDITIONAL 40 PERCENT BROUGHT THE BID PRICE, $25.18, BELOW ITS MANUFACTURING COST.

THE CONTRACTING OFFICER IN HIS STATEMENT OF MARCH 26, 1956, SAID:

"THE FIRST INDICATION RECEIVED IN THIS OFFICE OF THE ALLEGED MISTAKE IN BIDDING WAS THE CONTRACTOR'S LETTER OF MARCH 13, 1956, WHICH WAS, OF COURSE, MORE THAN A MONTH AFTER THE AWARD WAS MADE. IN REVIEWING THE FACTS, THERE APPEARS TO BE NO QUESTION THAT THE EUREKA WILLIAMS CORP. DID MAKE AN ERROR IN INDICATING THE 40 PERCENT QUANTITY DISCOUNT FOR THE PURCHASE OF 26 OR MORE ITS.'

BY LETTER DATED APRIL 5, 1956, THE CONTRACTOR STATED THAT THE $25.18 UNIT PRICE BID WAS BELOW ITS MANUFACTURING COST OF $32.43 AND REQUESTED AUTHORITY TO WITHDRAW ITS BID.

IT IS ESTIMATED BY YOUR OFFICE THAT ENFORCEMENT OF THE CONTRACT MAY RESULT IN A LOSS TO THE CONTRACTOR OF APPROXIMATELY $11,000, BECAUSE OF AN ANTICIPATED PURCHASE OF 1200 TO 1500 UNITS.

THE CONTRACTING OFFICER HAS REPORTED THAT HE WAS NOT AWARE OF ANY ERROR PRIOR TO AWARD. HOWEVER, IN A LATER STATEMENT DATED JUNE 11 HE ADMITTED THAT, IN VIEW OF THE FACT THAT THE EUREKA WILLIAMS BID WAS APPARENTLY NOT A DIRECT FACTORY BID, IT MAY HAVE BEEN SUFFICIENTLY OUT OF LINE WITH THE CLEMENTS BID, WHICH WAS DIRECT FROM THE FACTORY, TO HAVE PUT HIM ON NOTICE OF THE LIKELIHOOD OF ERROR AND TO HAVE REQUIRED VERIFICATION OF THE BID BEFORE ACCEPTANCE. YOUR OFFICE HAS ASCERTAINED INDEPENDENTLY THAT THE CONTRACTOR CUSTOMARILY QUOTES ONLY A FIVE PERCENT QUANTITY DISCOUNT ON SIMILAR ORDERS, AND IT IS UNDERSTOOD TO BE YOUR VIEW THAT CONTRACTING OFFICERS OF THE FEDERAL SUPPLY SERVICE SHOULD BE FAMILIAR NOT ONLY WITH COMMERCIAL MARKET PRICES OF ARTICLES OF WIDE GENERAL USE WHICH THEY ARE REQUIRED TO PROCURE FOR THE GOVERNMENT, BUT ALSO TO SOME EXTENT, AT LEAST, WITH THE DISTRIBUTION AND PRICING PRACTICES AND POLICIES OBTAINING IN THE INDUSTRIES INVOLVED. WHILE WE WOULD NOT FEEL JUSTIFIED IN IMPOSING SO STRICT A REQUIREMENT AS A RULE FOR GENERAL APPLICATION, WE AGREE THAT THE ACTUAL OVERALL NATURE AND EXTENT OF A PURCHASING OFFICER'S DUTIES AND RESPONSIBILITIES ARE FACTORS TO BE TAKEN INTO CONSIDERATION IN DETERMINING HIS OBLIGATION IN ANY PARTICULAR SITUATION. IN THE LIGHT OF ALL THE CIRCUMSTANCES IN THIS INSTANCE, WE CONCLUDE THAT TO CONSIDER THE AWARD MADE, WITHOUT INQUIRY, AS EFFECTING A BINDING CONTRACT WOULD BE IMPROPER. ACCORDINGLY THAT CONTRACT MAY BE CANCELLED.