B-131771, MAY 27, 1957

B-131771: May 27, 1957

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO A LETTER DATED MAY 6. ALLEGES IT MADE IN ITS BID ON WHICH PURCHASE ORDER NO. 4231-56 WAS AWARDED. THAT TWO BIDS WERE RECEIVED. THAT SINCE NEITHER OF THESE BIDS CONFORMED TO THE DELIVERY REQUIREMENTS OF THE INVITATION NO AWARD WAS MADE. A PURCHASE ORDER WAS PLACED WITH THAT AGENCY. THAT THE AGENCY COULD NO LONGER SUPPLY THE PAPER AT $22.60 PER REAM AND THAT ITS NEW PRICES WERE $38.32 FOR ORANGE COLORED PAPER AND $36.20 FOR GOLDENROD COLORED PAPER. THE WESTERN NEWSPAPER UNION WAS REQUESTED TO VERIFY ITS WRITTEN QUOTATION OF MARCH 20. THE COMPANY VERIFIED THAT IT WAS OFFERING TO SUPPLY 81 REAMS OF THE REQUIRED PAPER AT $21.95 PRE REAM. THAT THIS PRICE WAS FIRM.

B-131771, MAY 27, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MAY 6, 1957, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY (LOGISTICS), REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR WHICH THE WESTERN NEWSPAPER UNION, SALT LAKE CITY, UTAH, ALLEGES IT MADE IN ITS BID ON WHICH PURCHASE ORDER NO. 4231-56 WAS AWARDED.

IT APPEARS FROM THE RECORD THAT BY INVITATION NO. QM-42-015-56-92, THE PURCHASING DIVISION, UTAH GENERAL DEPOT, OGDEN, UTAH, REQUESTED BIDS--- TO BE OPENED MARCH 1, 1956--- FOR FURNISHING 81 REAMS OF PHOTOLITHOGRAPHIC MASKING PAPER, ENAMELED COATED 2 SIDES, SUB 80, LENGTH 50 INCHES, WIDTH 38 INCHES, IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-P-12172, DATED AUGUST 19, 1952; THAT TWO BIDS WERE RECEIVED, ONE FROM THE ALDINE PAPER COMPANY, INC., WHO QUOTED A PRICE OF $25.03 PER HUNDRED WEIGHT ($40.05 PER REAM), AND THE OTHER FROM THE WESTERN NEWSPAPER UNION WHO QUOTED A PRICE OF $21.95 PER REAM; THAT SINCE NEITHER OF THESE BIDS CONFORMED TO THE DELIVERY REQUIREMENTS OF THE INVITATION NO AWARD WAS MADE; AND THAT SINCE THE GENERAL SERVICES ADMINISTRATION ORALLY OFFERED ON MARCH 1, 1956, TO SUPPLY THE REQUIRED MASKING PAPER AT A PRICE OF $22.60 PER REAM, A PURCHASE ORDER WAS PLACED WITH THAT AGENCY. IT ALSO INDICATES THAT ON OR ABOUT MARCH 12, 1956, THE GENERAL SERVICES ADMINISTRATION NOTIFIED THE PURCHASING AGENT, BY TELEPHONE, THAT THE AGENCY COULD NO LONGER SUPPLY THE PAPER AT $22.60 PER REAM AND THAT ITS NEW PRICES WERE $38.32 FOR ORANGE COLORED PAPER AND $36.20 FOR GOLDENROD COLORED PAPER; THAT IN VIEW OF THESE CIRCUMSTANCES, THE PURCHASING OFFICE ON MARCH 20, 1956, BEGAN NEGOTIATIONS FOR THE ITEM BY SOLICITING QUOTATIONS FROM THE TWO SUPPLIERS WHO HAD PREVIOUSLY SUBMITTED BIDS IN RESPONSE TO INVITATION NO. QM-42-015- 56-92; AND THAT IN RESPONSE TO SUCH SOLICITATION, THE ALDINE PAPER COMPANY, INC., QUOTED A PRICE OF $40.05 PER REAM AND THE WESTERN NEWSPAPER UNION QUOTED A PRICE OF $21.95 PER REAM--- THE IDENTICAL PRICES PREVIOUSLY QUOTED BY THEM IN THEIR BIDS SUBMITTED IN RESPONSE TO THE PRIOR FORMAL INVITATION. IN HIS REPORT OF MARCH 8, 1957, THE CONTRACTING OFFICER STATES THAT IN VIEW OF THE WIDE DISCREPANCY BETWEEN THE PRICES QUOTED BY THE TWO COMPANIES, AND THE FACT THAT HIS OFFICE HAD RECENTLY BEEN ADVISED BY THE GENERAL SERVICES ADMINISTRATION THAT THE PRICE ON THE MASKING PAPER HAD BEEN RAISED, THE WESTERN NEWSPAPER UNION WAS REQUESTED TO VERIFY ITS WRITTEN QUOTATION OF MARCH 20, 1956. BY LETTER DATED MARCH 23, 1956, THE COMPANY VERIFIED THAT IT WAS OFFERING TO SUPPLY 81 REAMS OF THE REQUIRED PAPER AT $21.95 PRE REAM, F.O.B. DESTINATION, AND THAT THIS PRICE WAS FIRM. ON MARCH 28, 1956, PURCHASE ORDER NO. 4231-56, IN THE AMOUNT OF $1,850.60, WAS ISSUED TO THE WESTERN NEWSPAPER UNION AND ON APRIL 3, 1956, THE COMPANY ACCEPTED THE PURCHASE ORDER AND AGREED IN WRITING TO FURNISH THE REQUIRED SUPPLIES.

BY LETTER DATED JULY 6, 1956, THE WESTERN NEWSPAPER UNION ADVISED THAT AN ERROR HAD BEEN MADE IN ITS QUOTATION ON THE MASKING PAPER IN THAT IT HAD QUOTED A PRICE SUBSTANTIALLY BELOW ITS COST WHICH, IT STATED, WAS $36.40 PER REAM; AND THAT THE PAPER HAD ALREADY BEEN SHIPPED BY ITS SUPPLIER AND THAT IT WAS WITHHOLDING ITS INVOICE PENDING RECEIPT OF INFORMATION AS TO WHETHER THE CONTRACT PRICE OF THE PAPER COULD BE INCREASED TO THE AMOUNT OF ITS ACTUAL COST. IN SUPPORT OF ITS ALLEGATION OF ERROR, THE COMPANY SUBMITTED A PHOTOSTATIC COPY OF ITS SUPPLIER'S INVOICE, WHICH SHOWS THAT THE COMPANY WAS BILLED AT A PRICE OF $22.75 PER HUNDRED WEIGHT ($36.40 PER REAM) OR A TOTAL PRICE OF $2,957.50. BY LETTER DATED JULY 17, 1956, THE CONTRACTING OFFICER ADVISED THE COMPANY THAT IT COULD SUBMIT EVIDENCE IN SUPPORT OF ITS MISTAKE FOR CONSIDERATION BY HIGHER AUTHORITY OR IT COULD, IF IT PREFERRED, SUBMIT AN INVOICE FOR THE CONTRACT AMOUNT ON THE BASIS OF WHICH PAYMENT FOR THE PAPER WOULD BE EFFECTED.

IN A MEMORANDUM DATED AUGUST 20, 1956, THE ASSISTANT MANAGER OF THE SALT LAKE CITY OFFICE OF THE COMPANY, WHO COMPUTED THE COMPANY'S BID PRICE, STATED THAT THE SPECIFICATIONS CALLED FOR SUBSTANCE 80, LENGTH 50 INCHES, WIDTH 38 INCHES; THAT SUBSTANCE 80 REFERS TO A SHEET SIZE OF 25 INCHES BY 38 INCHES AND THAT A SHEET 38 INCHES BY 50 INCHES WOULD HAVE A REAM WEIGHT OF 160 OUNDS; THAT HE ERRONEOUSLY PICKED THE FIGURE 80 AS THE REAM WEIGHT AND USED THIS WEIGHT TO CALCULATE THE REAM COST; AND THAT HE HAD THEN MARKED UP THE PRICE BY 20 PERCENT AS WAS CUSTOMARY FOR COMMERCIAL BUSINESS INSTEAD OF BY 8 PERCENT, THE PERCENTAGE USED ON GOVERNMENT ORDERS. WITH THE MEMORANDUM THE ASSISTANT MANAGER SUBMITTED HIS ORIGINAL ESTIMATE SHEET AND A REVISED ESTIMATE SHEET ON WHICH IS SHOWN A PRICE OF $39.30 PER REAM FOR THE MASKING PAPER. THE RECORD INDICATES THAT DELIVERY OF THE PAPER WAS COMPLETED BY THE COMPANY'S SUPPLIER ON JULY 9, 1956; AND THAT ON DECEMBER 27, 1956, THE COMPANY SUBMITTED AN INVOICE FOR 81 REAMS OF PAPER AT A PRICE OF $21.95 PER REAM. THE PRICE NAMED IN THE PURCHASE ORDER, AND THAT IT WAS PAID ON THIS BASIS ON JANUARY 9, 1957.

THE RESPONSIBILITY FOR THE PREPARATION OF THE BID SUBMITTED IN RESPONSE TO THE INVITATION WAS UPON THE BIDDER. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.CLS. 120, 163, WHEREIN IT WAS STATED BY THE COURT OF CLAIMS OF THE UNITED STATES AS FOLLOWS:

"* * * THE PARTIES ARE DEALING AT ARMS LENGTH AND BIDDERS ARE PRESUMED TO BE QUALIFIED TO ESTIMATE THE PRICE AT WHICH THEY CAN PERFORM THE WORK SPECIFIED AT A REASONABLE PROFIT. IF THEY FAIL TO DO SO, AS PLAINTIFF DID IN THIS CASE, THE GOVERNMENT CANNOT FOR THAT REASON BE HELD FOR THE RESULTING LOSS.'

IT IS CLEAR THAT SUCH ERROR AS WAS MADE IN THE BID OF THE COMPANY WAS DUE SOLELY TO ITS OWN NEGLIGENCE OR OVERSIGHT--- AS ADMITTED BY THE COMPANY--- AND WAS IN NO WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. SEE GRYMES V. SANDERS ET AL., 93 U.S. 56, 61, WHEREIN THE SUPREME COURT OF THE UNITED STATES SAID:

"MISTAKE, TO BE AVAILABLE IN EQUITY, MUST NOT HAVE ARISEN FROM NEGLIGENCE, WHERE THE MEANS OF KNOWLEDGE WERE EASILY ACCESSIBLE. THE PARTY COMPLAINING MUST HAVE EXERCISED AT LEAST THE DEGREE OF DILIGENCE "WHICH MAY BE FAIRLY EXPECTED FROM A REASONABLE PERSON.'" ANY ERROR THAT WAS MADE IN THE BID OF THE COMPANY WAS UNILATERAL--- NOT MUTUAL-- AND, THEREFORE, DOES NOT ENTITLE THE COMPANY TO RELIEF. SEE OGDEN AND DOUGHERTY V. UNITED STATES, 102 C.CLS. 249; AND SALIGMAN ET AL. V. UNITED STATES, 56 F.SUPP. 505. ALSO, SEE 20 COMP. GEN. 652, AND 26 ID. 415.

AT THE TIME THE BIDS IN THIS CASE WERE OPENED, THERE WAS SOME DOUBT ON THE PART OF THE CONTRACTING OFFICER AS TO THE CORRECTNESS OF THE BID SUBMITTED BY THE WESTERN NEWSPAPER UNION AND THE COMPANY WAS REQUESTED TO VERIFY ITS BID. AFTER VERIFICATION OF ITS BID, THE CONTRACTING OFFICER WAS JUSTIFIED IN AWARDING THE CONTRACT ON THE COMPANY'S BID AS THE LOWEST RECEIVED. SEE CARNEGIE STEEL COMPANY V. CONNELLY, 89 N.J.L. 1, 97 A. 774; SHRIMPTON MFG. COMPANY V. BRIN, 59 TEX.CIV.APP. 352, 125 S.W. 942. THE FACT THAT THE COMPANY'S BID WAS NOT ACCEPTED UNTIL IT WAS OFFERED AN OPPORTUNITY TO, AND DID, VERIFY ITS BID PRICE PRECLUDES ANY ASSUMPTION THAT THE CONTRACTING OFFICER EXERCISED BAD FAITH OR ATTEMPTED TO TAKE ADVANTAGE OF THE COMPANY. SEE 27 COMP. GEN. 17.

IN THAT REGARD, THE CONTRACTING OFFICER HAS STATED THAT AFTER VERIFICATION THE SUSPICION OF MISTAKE IN THE COMPANY'S BID NO LONGER PERSISTED SINCE HE THEN ASSUMED THAT THE CONTRACTOR EITHER HAD PAPER ON HAND RECEIVED BEFORE THE PRICE INCREASE OR THAT ITS SUPPLIER HAD NOT YET INCREASED THE PRICE. SO FAR AS THE PRESENT RECORD SHOWS, THE ACCEPTANCE OF THE COMPANY'S BID WAS IN GOOD FAITH--- NO ERROR HAVING BEEN ALLEGED UNTIL THREE MONTHS AFTER ISSUANCE OF THE PURCHASE ORDER-- AND IN SUCH CIRCUMSTANCES CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO. SEE UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313; AND AMERICAN SMELTING AND REFINING COMPANY V. UNITED STATES, 259 U.S. 75.

ACCORDINGLY, THERE APPEARS TO BE NO LEGAL BASIS FOR MODIFYING THE PRICE SPECIFIED IN PURCHASE ORDER NO. 4231-56.