B-129075, SEP. 14, 1956

B-129075: Sep 14, 1956

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO A LETTER DATED AUGUST 27. A DECISION IS REQUESTED AS TO WHETHER THE CONTRACT PROPERLY MAY BE CANCELLED AND THE MATERIAL READVERTISED. WHICH WERE ACCEPTED AS TO ITEMS 5. IT IS REPORTED THAT SUBSEQUENT TO THE ISSUANCE OF THE SALES CATALOG BUT PRIOR TO THE OPENING OF THE BIDS. AN AMENDMENT TO THE CATALOG WAS APPROVED FOR THE PURPOSE OF REMOVING THE 38 TON CRANE FROM LOT 10 AND PLACING IT IN LOT 9. THE ACTUAL WORDING OF THE AMENDMENT WAS AS OLLOWS:"LOT 9. - USN NO. 42- 01387 WILL BE CHANGED TO USN NO. 42 00684. - USN NO. 42-11684 WILL BE CHANGED TO USN NO. 42 01387.'. IT WAS REPORTED THAT THE AMENDMENT WAS MAILED TO ALL BIDDERS PRIOR TO THE BID OPENING AND THAT AN ANNOUNCEMENT OF THE AMENDMENT WAS MADE AT 13.30 HOURS.

B-129075, SEP. 14, 1956

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED AUGUST 27, 1956, WITH ENCLOSURES FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL), RELATING TO A MISTAKE IN BID ALLEGED BY THE CHOKAI SHOKAI COMPANY, LTD., TOKYO, JAPAN, UNDER CONTRACT NO. N62649S-3138, (SALES INVITATION NO. B-98-56) ISSUED BY THE U.S. NAVAL SUPPLY DEPOT, YOKOSUKA, JAPAN. IN VIEW OF THE FACTS SET FORTH IN THE ENCLOSURES TO THE LETTER OF AUGUST 27, A DECISION IS REQUESTED AS TO WHETHER THE CONTRACT PROPERLY MAY BE CANCELLED AND THE MATERIAL READVERTISED.

THE RECORD SHOWS THAT BY INVITATION NO. B-98-56, DATED MARCH 29, 1956, THE DISPOSAL OFFICER, U.S. NAVAL SUPPLY DEPOT, YOKOSUKA, JAPAN, OFFERED FOR SALE CERTAIN ITEMS OF GOVERNMENT-OWNED PROPERTY LOCATED AT THE NAVAL AIR STATION, IWAKUNI, JAPAN, THE BIDS TO BE OPENED ON APRIL 27, 1956. RESPONSE TO THE INVITATION, CHOKAI SHOKAI COMPANY, LTD., SUBMITTED BIDS AS TO ITEMS 5, 6, 7, 8, 9 AND 10 OF THE BID INVITATION, WHICH WERE ACCEPTED AS TO ITEMS 5, 6, 7, 8 AND 10, AND AWARD MADE UNDER CONTRACT NO. N62649S- 3138, DATED MAY 4, 1956.

IN ITS ORIGINAL FORM INVITATION NO. B-98-56 INCLUDED IN LOT 9 ONE NORTHWEST SHOVEL, 16 TONS, USN NO. 42-01387, AND IN LOT 10 ONE 16 TON NORTHWEST CRANE, USN NO. 42-00148, AND ONE NORTHWEST CRANE, 38 TONS, USN NO. 42-00684. IT IS REPORTED THAT SUBSEQUENT TO THE ISSUANCE OF THE SALES CATALOG BUT PRIOR TO THE OPENING OF THE BIDS, THE SUPPLY OFFICER OF THE HOLDING ACTIVITY--- THE NAVAL AIR STATION AT IWAKUNI--- DETERMINED THAT THE 38 TON CRANE, BEARING USN NO. 42-11684, HAD BEEN PLACED IN LOT 10 THROUGH ERROR. AN AMENDMENT TO THE CATALOG WAS APPROVED FOR THE PURPOSE OF REMOVING THE 38 TON CRANE FROM LOT 10 AND PLACING IT IN LOT 9, AND CHANGING THE 16 TON SHOVEL BEARING USN NO. 42 01387 FROM LOT 9 TO LOT 10. THE ACTUAL WORDING OF THE AMENDMENT WAS AS OLLOWS:"LOT 9--- USN NO. 42- 01387 WILL BE CHANGED TO USN NO. 42 00684. LOT 10--- USN NO. 42-11684 WILL BE CHANGED TO USN NO. 42 01387.'

BY A COMMUNICATION DATED AUGUST 6, 1956, IT WAS REPORTED THAT THE AMENDMENT WAS MAILED TO ALL BIDDERS PRIOR TO THE BID OPENING AND THAT AN ANNOUNCEMENT OF THE AMENDMENT WAS MADE AT 13.30 HOURS, APRIL 27, 1956, PRIOR TO OPENING OF BIDS, AND THAT ALL BIDDERS WERE GIVEN AN OPPORTUNITY TO ADJUST THEIR BIDS IN ACCORDANCE WITH THE AMENDMENT. IN THIS CONNECTION, ATTENTION IS INVITED TO THE FOLLOWING PARAGRAPH FROM A COMMUNICATION DATED JUNE 23, 1956:

"3. ON 27 APRIL PRIOR TO THE OPENING OF THE BIDS, ALL BIDDERS WERE PRESENT AND EACH RECEIVED AN AMENDMENT ISSUED BY THE DISPOSAL OFFICER ADVISING ALL BIDDERS OF THE CHANGE OF MATERIAL WHICH IS DESCRIBED IN PARAGRAPH (1) OF THIS LETTER. ALL BIDDERS WERE AFFORDED AN OPPORTUNITY TO CHANGE BID PRICES BEFORE PUBLICATION.'

BY LETTER OF MAY 14, 1956, MR. TADAO CHOKAI, PRESIDENT OF THE CONTRACTING COMPANY, STATED THAT ON APRIL 20, 1956, HE INSPECTED LOTS 9 AND 10 AT THE IWAKUNI NAVAL AIR STATION AND APPARENTLY FOUND THEM TO BE AS REPRESENTED IN THE CATALOG. IN FACT, IN THE COMMUNICATION OF JUNE 23, 1956, IT IS ADMITTED THAT AT THE TIME OF INSPECTION ALL ITEMS WERE IDENTIFIED BY LOTS IN ACCORDANCE WITH THE ORIGINAL SALES CATALOG. NOTWITHSTANDING THE STATEMENT IN THE COMMUNICATION OF AUGUST 6, 1956, THAT THE AMENDMENT WAS MAILED TO ALL BIDDERS PRIOR TO THE BID OPENING--- NO MAILING DATE BEING SPECIFIED IT APPEARS TO BE REASONABLY ESTABLISHED, AS INDICATED IN MR. SHOKAI'S LETTER OF MAY 14, 1956, THAT HE RECEIVED NO NOTICE OF THE AMENDMENT UNTIL IMMEDIATELY PRIOR TO THE BID OPENING. THAT STATEMENT IS SUPPORTED BY THE ABOVE-QUOTED PARAGRAPH WHICH INDICATES THAT THE BIDDERS WERE FIRST FURNISHED THE AMENDMENT JUST PRIOR TO THE BID OPENING.

THE CONTROVERSY IN THIS CASE APPEARS TO ARISE OUT OF THE FACT THAT MR. SHOKAI WAS CONFUSED AS TO THE PURPOSES OF THE AMENDMENT, IT BEING HIS STATED BELIEF THAT THE AMENDMENT WAS INTENDED TO ONLY CHANGE THE USN NUMBER FROM ONE PIECE OF EQUIPMENT TO ANOTHER, AND THAT IT WAS NOT INTENDED AS A CHANGE OF MATERIAL FROM ONE ITEM NUMBER TO ANOTHER ON THE SALES CATALOG. LOOKING SOLELY AT THE LANGUAGE OF THE AMENDMENT, WHICH DID NOT AFFECT THE RESPECTIVE DESCRIPTIONS OF ITEMS 9 AND 10, WE CANNOT SAY THAT SUCH AN UNDERSTANDING WAS UNREASONABLE.

IT SEEMS TO BE CLEARLY ESTABLISHED THAT THE CONTRACTOR'S BID AS TO ITEM 10 WAS BASED UPON THE EXPECTATION OF RECEIVING THE PROPERTY COVERED THEREBY AS SET FORTH IN THE ORIGINAL SALES CATALOG, THAT IS TO SAY, TWO CRANES HAVING AN ACQUISITION COST OF $60,000. THAT BID WAS NEVER CHANGED. WHILE IT APPEARS THAT THERE WAS AN ATTEMPT ON THE PART OF THE DISPOSAL OFFICER AT THE "LAST INUTE" TO ADVISE THE BIDDERS AS TO THE CHANGE INTENDED TO BE EFFECTED BY THE AMENDMENT, IT DOES SEEM THAT THE TIME ALLOWED TO CONSIDER AND ADJUST PRICES WAS HARDLY ADEQUATE, AND SO FAR AS THE WRITTEN RECORD IS CONCERNED IT IS AT LEAST QUESTIONABLE WHETHER THE LANGUAGE OF THE AMENDMENT WAS SUFFICIENT TO ACCOMPLISH ITS STATED PURPOSE.

IT APPEARS THAT BY REASON OF LANGUAGE DIFFICULTIES OR OTHERWISE THE BIDDER FAILED TO UNDERSTAND THE PURPOSE OF THE AMENDMENT, SO THAT IT CANNOT BE SAID THAT THE BIDDER INTENDED TO ALLOW THE BID TO STAND AS UNDER THE AMENDMENT AS INTERPRETED BY THE CONTRACTING OFFICER. IT IS OUR VIEW THAT THERE MAY NOT BE IMPUTED TO THE BIDDER KNOWLEDGE WHICH, IN FACT, IT COULD HAVE OBTAINED ONLY FROM A VERBAL ANNOUNCEMENT, AND THUS IT FOLLOWS THAT ITS BID WAS FOR CONSIDERATION ONLY ON THE BASIS OF THE ORIGINAL INVITATION.

A MEETING OF MINDS OF PARTIES IS A FUNDAMENTAL REQUISITE OF A CONTRACT IT HAS BEEN HELD THAT TO CONSTITUTE A MEETING OF MINDS OF PARTIES TO MAKE A CONTRACT ENFORCEABLE, ALL THE TERMS WHICH THE PARTIES INTENDED TO INCLUDE IN FORMAL AGREEMENT MUST BE SHOWN TO HAVE BEEN AGREED ON. AMERICAN MERCHANT MARINE INSURANCE COMPANY V. LETTON, 9 F.2D 799. UNDER THE FACTS REPORTED, IT IS NOT BELIEVED THAT IT CAN BE SAID THERE WAS SUCH A MEETING OF THE MINDS OF THE CONTRACTING PARTIES AS TO CONSTITUTE A VALID AND BINDING CONTRACT IN THIS CASE. ACCORDINGLY, ITEM 10 OF THE CONTRACT MAY BE CANCELLED WITHOUT LIABILITY TO THE CONTRACTOR.

A REFERENCE TO THIS DECISION SHOULD BE MADE ON THE CONTRACT.

THE PAPERS, WITH THE EXCEPTION OF THE STATEMENTS DATED JUNE 23 AND AUGUST 6, 1956, ARE RETURNED HEREWITH.