B-129514, NOV. 29, 1956

B-129514: Nov 29, 1956

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO A LETTER DATED NOVEMBER 14. RELATIVE TO A MISTAKE IN BID ALLEGED TO HAVE BEEN MADE BY KILLARK ELECTRIC MANUFACTURING COMPANY IN ITS BID SUBMITTED PURSUANT TO WHICH CONTRACT NO. N102-63563 WAS AWARDED. THE COMPANY HAS NEVER BEFORE BID DIRECTLY ON A GOVERNMENT CONTRACT AND IS NOT FAMILIAR WITH GOVERNMENTAL CONTRACTING PROCEDURES. 2. THE ESTIMATES ON WHICH ITS BID WAS PREPARED WERE THROUGH ERROR PREDICATED UPON FURNISHING A STANDARD FLOOR LIGHT RATHER THAN THE HIGHLY SPECIALIZED TYPE DESCRIBED BY THE SPECIFICATIONS. 4. IT WAS THEN ESTABLISHED THAT THE COST OF THE NECESSARY PARTS GOING INTO THE EQUIPMENT WAS APPROXIMATELY $47 PER UNIT. THE CONTRACTOR WILL LOSE A LARGE SUM OF MONEY AND THIS LOSS WOULD SERIOUSLY DAMAGE THE CONTRACTOR'S STANDING AS A SMALL BUSINESS AND ADVERSELY AFFECT THE GOVERNMENT'S INTEREST POSSIBLY BY CAUSING THE CONTRACTOR TO BE DELINQUENT IN PERFORMING THE CONTRACT DUE TO THE FACT THAT THE CONTRACTOR HAS NOT PRODUCED THE LIGHT.

B-129514, NOV. 29, 1956

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 14, 1956 (R112 L4-1) L4/NY1), WITH ENCLOSURES, FROM THE CHIEF, BUREAU OF SUPPLIES AND ACCOUNTS, RELATIVE TO A MISTAKE IN BID ALLEGED TO HAVE BEEN MADE BY KILLARK ELECTRIC MANUFACTURING COMPANY IN ITS BID SUBMITTED PURSUANT TO WHICH CONTRACT NO. N102-63563 WAS AWARDED.

UNDER DATE OF OCTOBER 15, 1956, THE KILLARK ELECTRIC MANUFACTURING COMPANY PETITIONED OUR OFFICE URGING THAT WE AUTHORIZE YOUR DEPARTMENT TO AMEND OR CANCEL THE CONTRACT ON GROUNDS AS FOLLOWS:

1. THE COMPANY HAS NEVER BEFORE BID DIRECTLY ON A GOVERNMENT CONTRACT AND IS NOT FAMILIAR WITH GOVERNMENTAL CONTRACTING PROCEDURES.

2. IT HAS NEVER PRODUCED A FLOOD LIGHT.

3. ALTHOUGH IT BID IN GOOD FAITH, THE ESTIMATES ON WHICH ITS BID WAS PREPARED WERE THROUGH ERROR PREDICATED UPON FURNISHING A STANDARD FLOOR LIGHT RATHER THAN THE HIGHLY SPECIALIZED TYPE DESCRIBED BY THE SPECIFICATIONS.

4. WHEN THE GOVERNMENT REQUESTED VERIFICATION OF THE PRICE QUOTED, ITS ESTIMATING PEOPLE AGAIN REVIEWED THE PRICE STATED IN THE BID ON THE BASIS OF FURNISHING A STANDARD LIGHT RATHER THAN THE SPECIALIZED TYPE.

5. FOLLOWING RECEIPT OF THE CONTRACTOR'S QUOTATIONS FROM SUPPLIERS, IT WAS THEN ESTABLISHED THAT THE COST OF THE NECESSARY PARTS GOING INTO THE EQUIPMENT WAS APPROXIMATELY $47 PER UNIT, NOT INCLUDING FREIGHT, COMMISSIONS OR OVERHEAD.

6. IF FORCED TO PERFORM AT THE PRICE OF $35 PER UNIT QUOTED, THE CONTRACTOR WILL LOSE A LARGE SUM OF MONEY AND THIS LOSS WOULD SERIOUSLY DAMAGE THE CONTRACTOR'S STANDING AS A SMALL BUSINESS AND ADVERSELY AFFECT THE GOVERNMENT'S INTEREST POSSIBLY BY CAUSING THE CONTRACTOR TO BE DELINQUENT IN PERFORMING THE CONTRACT DUE TO THE FACT THAT THE CONTRACTOR HAS NOT PRODUCED THE LIGHT.

THE SUPPLY DEPARTMENT, PORTSMOUTH NAVAL SHIPYARD, PORTSMOUTH, NEW HAMPSHIRE, BY INVITATION NO. IFB-102-589-56PR, ISSUED MAY 14, 1956, INVITED SEALED BIDS, IN DUPLICATE, FOR FURNISHING 1,500 FLOOD LIGHTS, ELECTRIC, 500 WATT, ALUMINUM HOUSING, SPRAY-TIGHT, NON-MAGNETIC, TYPE K- 15B, TO BE IN ACCORDANCE WITH BUSHIPS DWG. 9-S-5452-L REV. 9. BIDDERS WERE ADVISED THAT THE STUFFING TUBE SHOULD BE PIECE S6202 74385, SIZE 2, AND BE FURNISHED WITH THE PARTS DESCRIBED ON PAGE 2 OF THE BID SCHEDULE. THE BIDS RECEIVED WERE SCHEDULED TO BE OPENED ON JUNE 14, 1956.

THE RECORD SHOWS THAT 9 BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION AS FOLLOWS:

TABLE BIDDER UNIT PRICE TOTAL KILLARK ELEC.MFG.CO.

$35.00 $ 52500.00 S AND M LAMP CO. 42.00 63000.00 MULTI ELEC.MFG., INC. 52.20 78300.00 GRAYBAR ELEC.CO., INC.

64.33 96445.00 MODERN METAL MFG.CO. 64.59 96885.00 CARLISLE AND FINCH CO. 64.82 97230.00 CROUSE HINDS CO.

71.60 107400.00 AMERICAN AIR PRODUCTS CORP. 86.80 130200.00 STEWART STEEL PRODUCTS, INC. 87.58 131370.00

THE SECOND-LOW BID IN THE AMOUNT OF $42 PER UNIT OFFERED A COMMERCIAL FLOOD LIGHT WHICH WAS NOT ACCEPTABLE. SINCE THE BID OF KILLARK MANUFACTURING COMPANY WAS OUT OF LINE WITH THE OTHER BIDS AND THE AMOUNTS PAID FOR SIMILAR LIGHTS IN THE PAST, THAT COMPANY WAS REQUESTED BY TELEGRAM OF JUNE 15, 1956, TO CONFIRM THE PRICE QUOTED AND TO STATE WHETHER THE MATERIAL OFFERED WAS IN STRICT ACCORDANCE WITH BUSHIPS DWG. 9- S-5452-L REV. 9 EXCEPT AS MODIFIED BY THE INVITATION TO BID. IN REPLY THE BIDDER STATED IN LETTER DATED JUNE 19, 1956, THAT ALL DRAWINGS HAD BEEN CAREFULLY REVIEWED AND THAT THE PRICE OF $35 INCLUDED ALL MATERIALS CALLED FOR ON THE DRAWINGS. IT WAS STATED FURTHER THAT THE BIDDER DID NOT HAVE COMPLETE SPECIFICATIONS ON PLANTING OR THE STUFFING TUBE BUT HAD FIGURED IN ITS COST TO THE EXTENT CONSIDERED NECESSARY TO COVER THESE TWO ITEMS. IT WAS STATED ALSO THAT THE BIDDER WAS BASING THE PRICE OF $35 ON FURNISHING THE ENTIRE LOT OF 1500 FLOOD LIGHTS AND THAT BIDDER WOULD "SHIP FREIGHT PREPAID TO THE VARIOUS DESTINATIONS AS CALLED .' THEREAFTER, BY LETTER OF JULY 16, 1956, THE KILLARK MANUFACTURING COMPANY ADVISED THAT THE DRAWINGS MISSING FROM THE ORIGINAL ESTIMATED COST ON WHICH ITS BID PRICE WAS BASED HAD BEEN FAR EXCEEDED BY ACTUAL COST FIGURES OBTAINED FROM ITS SUPPLIERS AND CLAIMED THAT AN ERROR HAD BEEN MADE IN PREPARING ITS BID. IT WAS STATED THAT AT THE TIME THE BID WAS PREPARED THE BIDDER WAS UNDER THE IMPRESSION THAT MOST OF THE PARTS FOR PRODUCTION OF THE LIGHT COULD BE HANDLED IN ITS FACTORY BUT HAD FOUND THAT ITS PRODUCTION EQUIPMENT WOULD BE ABLE TO PRODUCE ONLY A FEW PARTS AND THAT THE BALANCE WOULD HAVE TO BE BOUGHT IN THE OPEN MARKET. IT WAS SUGGESTED THAT THERE WERE OTHER PEOPLE IN THE FLOOD LIGHTING FIELD WHO WERE BETTER EQUIPPED TO SUPPLY THE TYPE LIGHT REQUIRED WITHIN THE TIME SPECIFIED AND "THAT ONE OF THOSE FIRMS SHOULD HAVE THIS ORDER.'

THE CONTRACTING OFFICER REPORTS THAT THE CONTRACTOR'S ORIGINAL WORKSHEET AND ESTIMATE CONTAIN ONLY A SMALL PORTION OF THE MATERIALS ACTUALLY LISTED ON DRAWING 9-S-5452-L AND DO NOT COVER THE MAJOR ITEMS OF COST. IT IS NOTED ALSO THAT THIS WORKSHEET DOES NOT INCLUDE OVERHEAD, FREIGHT, SALESMEN'S COMMISSIONS OR STUFFING TUBE. A SECOND WORKSHEET PREPARED BY THE BIDDER'S ENGINEER AFTER RECEIPT OF NOTICE TO CONFIRM THE BID PRICE ALSO DOES NOT INCLUDE A COMPLETE LIST OF PARTS REQUIRED. A FINAL WORKSHEET PREPARED BY THE CONTRACTOR IS REPORTED TO CONTAIN A COMPLETE LIST OF MATERIALS BUT DOES NOT INCLUDE PREPAID FREIGHT TO THE SEVERAL DESTINATIONS LISTED IN THE CONTRACT NOR OVERHEAD OR PROFIT. THIS ESTIMATE REPRESENTS THE ACTUAL COST OF MATERIALS AND TOOLING AMOUNTING TO APPROXIMATELY $47 PER UNIT BASED UPON QUOTATIONS FROM SUPPLIERS WHICH, HOWEVER, DOES NOT INCLUDE ANY ALLOWANCE FOR TRANSPORTATION CHARGES, OVERHEAD OR PROFIT.

THE CONTRACTING OFFICER REPORTS THAT EVEN AFTER THE BIDDER HAD CONFIRMED ITS PRICE OF $35 HE WAS STILL SKEPTICAL OF BOTH THE PRICE AND THE CONTRACTOR'S ABILITY TO PERFORM THE CONTRACT. FOR THAT REASON A TELEPHONE CALL WAS MADE TO THE COGNIZANT INSPECTOR OF NAVAL MATERIAL WHO ADVISED ,THE CONTRACTING OFFICER INFORMALLY THAT THE CONTRACTOR WAS AN ELECTRICAL MANUFACTURER AND WAS WELL-KNOWN AND CONSIDERED REPUTABLE.' THE CONTRACT WAS THEN PLACED WITH THE CONTRACTOR AFTER THE PRICE WAS CONFIRMED AND THE RELIABILITY OF THE COMPANY ESTABLISHED TO THE SATISFACTION OF THE CONTRACTING OFFICER.

THE REQUEST FOR CANCELLATION OF THE CONTRACT WAS DENIED IN A LETTER DATED OCTOBER 3, 1956, BY THE CONTRACTING OFFICER WITH THE STATEMENT THAT FAILURE TO PERFORM THE CONTRACT WOULD MAKE IT NECESSARY TO TERMINATE THE CONTRACT FOR DEFAULT IN WHICH EVENT THE FLOOD LIGHTS WOULD BE PROCURED AGAINST THE CONTRACTOR'S ACCOUNT. IT IS STATED FURTHER, HOWEVER, IN THE REPORT OF THE CONTRACTING OFFICER FORWARDED WITH THE LETTER DATED NOVEMBER 14, 1956, THAT IT APPEARS IN RETROSPECT THAT THE CONTRACTING OFFICER SHOULD HAVE ADVISED THE CONTRACTOR OF THE PRICES QUOTED BY THE TWO OTHER COMPANIES WHO HAD PREVIOUSLY SUPPLIED THE LIGHT TO THE GOVERNMENT AT ALMOST TWICE THE PRICE OF $35 PER UNIT.

THE ESTABLISHED RULE IS THAT THE GOVERNMENT SHOULD NOT IN ANY WAY BE OBLIGED TO ACT AS GUARDIAN FOR CARELESS BIDDERS WHEN THE PRICE IS IN LINE WITH THE OTHER BIDS. SEE, IN THIS CONNECTION, SALIGMAN V. UNITED STATES, 56 F.SUPP. 505, 507. BY VIRTUE OF THE GREAT DISPARITY, HOWEVER, BETWEEN THE LOW BID AND THE OTHER BIDS IN THE PRESENT CASE THE GOVERNMENT WAS ON NOTICE OF THE PROBABILITY OF A MISTAKE AND REQUESTED THE BIDDER TO VERIFY ITS BID. THE BIDDER DID CONFIRM ITS BID BUT IT IS CLEAR FROM THE RECORD THAT THE BIDDER WAS NO BETTER INFORMED AS TO THE GOVERNMENT'S REQUIREMENTS AT THAT TIME THAN IT WAS WHEN THE BID WAS ORIGINALLY PREPARED AND THAT IT WAS STILL LABORING UNDER THE DELUSION THAT THE REQUIREMENTS OF THE ADVERTISED CONDITIONS COULD BE MET FOR THE PRICE OF $35 PER UNIT. THE PRICE THUS QUOTED BY THE CONTRACTOR WAS OUT OF PROPORTION TO THE VALUE OF THE EQUIPMENT, AND THE PRICES QUOTED BY THE CONTRACTOR'S SUPPLIERS UNEQUIVOCALLY SUPPORTS THE CONTRACTOR'S EXPLANATION THAT THE PRICE OF $35 WAS NOT BASED ON FURNISHING THE LIGHT DESCRIBED IN THE INVITATION. MOREOVER, THE CONTRACTING OFFICER AT THE TIME OF AWARD APPARENTLY WAS NOT CONVINCED THAT THE BIDDER UNDERSTOOD EITHER THE BASIC REQUIREMENTS OF THE GOVERNMENT AS DESCRIBED IN THE INVITATION OR THE SIGNIFICANCE OF THE REQUEST FOR CONFIRMATION OF THE BID. ALSO, IT APPEARS THAT THE CONTRACTING OFFICER SHOULD HAVE REALIZED THAT A BIDDER INTENTIONALLY WOULD NOT OFFER TO FURNISH THE FLOOD LIGHT COVERED BY THE INVITATION FOR $35 PER UNIT, PARTICULARLY IN VIEW OF THE GREAT DIFFERENCE BETWEEN THE CONTRACTOR'S BID AND THE OTHER BIDS RECEIVED AND THE FURTHER FACT THAT ONLY A FEW MONTHS BEFORE THE GOVERNMENT HAD PURCHASED THE LIGHT FOR $65 PER UNIT. UNDER THE CIRCUMSTANCES, THERE IS SOME BASIS FOR THE VIEW THAT, NOTWITHSTANDING THE BID CONFIRMATION, THE CONTRACTING OFFICER AT THE TIME OF AWARD WAS ON AT LEAST CONSTRUCTIVE NOTICE OF ERROR IN THE BID AND THAT A BINDING CONTRACT DID NOT RESULT FROM THE AWARD. COMPARE UNITED STATES V. METRO NOVELTY MANUFACTURING CO., INC., 125 F.SUPP. 713.

ACCORDINGLY, THE CONTRACT MAY BE CANCELED WITHOUT LIABILITY TO EITHER PARTY.