B-129888, JAN. 4, 1957

B-129888, JAN. 4, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 21, 1956, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY (LOGISTICS), REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY THE AJACK PLUMBING AND HEATING CONTRACTORS, BROOKLYN, NEW YORK, IN THEIR BID ON WHICH CONTRACT NO. DA 28-043-SC-1726, DATED JUNE 30, 1956, WAS AWARDED.

BY INVITATION NO. 28-043-56-209, THE CONTRACTING OFFICER, PURCHASING AND CONTRACTING SECTION, FORT MONMOUTH, NEW JERSEY, REQUESTED BIDS--- TO BE OPENED JUNE 26, 1956--- FOR FURNISHING LABOR AND MATERIALS AND PERFORMING ALL WORK REQUIRED FOR INSTALLATION OF OIL BURNERS AND DOMESTIC HOT WATER HEATERS IN THE EXISTING HEATING SYSTEM AT EVANS SIGNAL LABORATORY, FORT MONMOUTH, NEW JERSEY. THE AJACK PLUMBING AND HEATING CONTRACTORS, THE LOW AND ONLY BIDDER, ADVISED THE CONTRACTING OFFICER BY LETTER OF JUNE 28, 1956, THAT AN ERROR WAS MADE IN THEIR BID, STATING THAT THE REHABILITATION OF THE DUNHAM TEMPERATURE CONTROL SYSTEM (WHICH IS PART OF THE OVERALL CONTRACT) WOULD COST THEM $12,500, WHEREAS ONLY $2,500 WAS ESTIMATED FOR THIS ITEM. THE COMPANY REQUESTED THAT THEIR BID BE CHANGED FROM $32,893 TO $42,893, AND THAT IF THIS COULD NOT BE DONE THEY WOULD LIKE TO WITHDRAW THEIR BID. THE DEPARTMENT OF THE ARMY DETERMINED THAT THE BID OF THE COMPANY SHOULD BE CONSIDERED IN THE FORM AND AT THE PRICE AS SUBMITTED, AND AS A RESULT, CONTRACT NO. DA 28-043-SC-1726 WAS AWARDED. AFTER THE COMPANY REFUSED TO GIVE THE REQUIRED PAYMENT BOND AND PERFORMANCE BOND AND TO PROSECUTE THE REQUIRED WORK, THE CONTRACT WAS SUBSEQUENTLY TERMINATED FOR DEFAULT AND THE SERVICES CALLED FOR THEREIN WERE REPURCHASED FROM ANOTHER SOURCE AT AN EXCESS COST OF $11,551. THE CONTRACTOR WAS REQUESTED TO REMIT THIS EXCESS COST. THE CONTRACTOR HAS APPEALED THE NOTICE OF TERMINATION TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS. IT IS STATED IN THE LETTER OF NOVEMBER 21, 1956, THAT THE BASIC ISSUE INVOLVED IN THIS APPEAL IS THE CONTRACTOR'S ALLEGATION OF A MISTAKE IN BID, AND "SINCE THE ARMED SERVICES BOARD OF CONTRACT APPEALS HAS NO JURISDICTION IN MISTAKE IN BID CASES" THE MATTER WAS FORWARDED HERE FOR FINAL DETERMINATION.

THE COMPANY, AT THE TIME IT NOTIFIED THE CONTRACTING OFFICER OF THE ERROR, FURNISHED ITS ORIGINAL WORKSHEETS SHOWING THAT IT HAD ESTIMATED THAT THE COST OF OVERHAULING THE TEMPERATURE CONTROLS WOULD BE $2,500. WAS FURTHER ALLEGED THAT THE TIME ALLOWED FOR BIDDING WAS NOT SUFFICIENT TO PERMIT OF GETTING A QUOTATION FROM THE DUNHAM COMPANY, AND THAT THE $2,500 FIGURE WAS BASED UPON PRICES OF ANOTHER MANUFACTURE OF SIMILAR TEMPERATURE CONTROLS EQUAL TO DUNHAM, BUT THAT THE FIGURE FINALLY QUOTED BY THE DUNHAM COMPANY WAS $12,500. THE CONTRACTING OFFICER DID NOT DENY ANY OF THOSE ALLEGATIONS, AND IN FACT RECOMMENDED THAT THE BID BE PERMITTED TO BE WITHDRAWN. SINCE THE SPECIFICATIONS REQUIRED THE USE OF DUNHAM PARTS AND INSTALLATION BY FACTORY TRAINED MECHANICS, IT IS CLEAR THAT THE BID SUBMITTED WAS $10,000 TOO LOW, AND THE EXPLANATION OFFERED APPEARS SUFFICIENT TO SHOW A BONA FIDE ERROR.

WHILE IT IS TRUE THAT THE RESPONSIBILITY FOR THE PREPARATION OF A BID IS UPON THE BIDDER, WHO ORDINARILY MUST BEAR THE CONSEQUENCES OF AN ERROR IN THE BID UPON WHICH A CONTRACT IS BASED, THAT RULE DOES NOT ENTITLE THE GOVERNMENT TO TAKE ADVANTAGE OF A BIDDER'S ERROR WHEN, AS IN THE PRESENT CASE, IT HAS BEEN ALLEGED AND SATISFACTORILY ESTABLISHED PRIOR TO AWARD. THE GENERAL RULE IS THAT THE ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN 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 CLARKE 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, 576. UNDERTAKING TO BIND A BIDDER BY ACCEPTANCE OF A BID AFTER NOTICE OF A CLAIM OF ERROR BY THE BIDDER, THE GOVERNMENT VIRTUALLY UNDERTAKES THE BURDEN OF PROVING EITHER THAT THERE WAS NO ERROR OR THAT THE BIDDER'S CLAIM WAS NOT MADE IN GOOD FAITH. THE DEGREE OF PROOF REQUIRED TO JUSTIFY WITHDRAWAL OF A BID BEFORE AWARD IS NO WAY COMPARABLE TO THAT NECESSARY TO ALLOW CORRECTION OF AN ERRONEOUS BID.

SINCE THE NOTICE OF AWARD WAS GIVEN AFTER RECEIPT OF EVIDENCE BY THE CONTRACTING OFFICER REASONABLY ESTABLISHING THE BIDDER'S ERROR, WE ARE OF THE OPINION THAT THE CONTRACT WAS NOT LEGALLY ENFORCEABLE. IT FOLLOWS THAT THE INDEBTEDNESS FOR EXCESS COSTS STATED AGAINST THE AJACK PLUMBING AND HEATING CONTRACTORS SHOULD BE CANCELED.

THE PAPERS, WITH THE EXCEPTION OF THE COMPANY'S LETTER OF JUNE 28, 1956, AND ITS WORKSHEETS, AND THE CONTRACTING OFFICER'S STATEMENT OF FACT, ARE RETURNED HEREWITH.