B-134019, APR. 23, 1958

B-134019: Apr 23, 1958

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INCORPORATED: FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 7. AMONG THE REFERRED-TO ENCLOSURES IS A COPY OF LETTER DATED DECEMBER 3. SETTING FORTH CERTAIN CONTENTIONS PURPORTING TO SHOW THAT UNDER THE ATTENDING FACTS AND APPLICABLE LAW THE PROCUREMENT AGENCY WAS WITHOUT JUSTIFICATION IN CHARGING YOU WITH THE EXCESS COSTS INCURRED BY THE GOVERNMENT IN OBTAINING THE INVOLVED EQUIPMENT FROM ANOTHER SOURCE DUE TO YOUR REFUSAL TO PERFORM. IT IS CONTENDED BY YOUR ATTORNEY. THAT YOUR BID WAS PREPARED IN ERROR WHICH WAS MADE KNOWN TO THE CONTRACTING OFFICER PRIOR TO AWARD AND THEREFORE NO BINDING CONTRACT WAS LEGALLY CONSUMMATED. IT IS FURTHER ALLEGED THEREIN THAT EVEN IF A BINDING CONTRACT HAD BEEN ACCOMPLISHED THE GOVERNMENT FAILED TO AFFORD YOU THE OPPORTUNITY TO PROCURE THE EQUIPMENT FROM A SOURCE OTHER THAN YOUR CONTEMPLATED SUPPLIER.

B-134019, APR. 23, 1958

TO ALLIED MEDICAL SUPPLY, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 7, 1957, AND ENCLOSURES, PROTESTING THE ACTION TAKEN BY PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, IN RAISING A CHARGE AGAINST YOU FOR DAMAGES BECAUSE OF YOUR DEFAULT UNDER CONTRACT NO. SA74PH-139, AWARDED TO YOU UNDER DATE OF JUNE 28, 1957. AMONG THE REFERRED-TO ENCLOSURES IS A COPY OF LETTER DATED DECEMBER 3, 1957, TO YOU FROM JOHN K. HACKNEY, ATTORNEY, SETTING FORTH CERTAIN CONTENTIONS PURPORTING TO SHOW THAT UNDER THE ATTENDING FACTS AND APPLICABLE LAW THE PROCUREMENT AGENCY WAS WITHOUT JUSTIFICATION IN CHARGING YOU WITH THE EXCESS COSTS INCURRED BY THE GOVERNMENT IN OBTAINING THE INVOLVED EQUIPMENT FROM ANOTHER SOURCE DUE TO YOUR REFUSAL TO PERFORM.

IT IS CONTENDED BY YOUR ATTORNEY, IN SUBSTANCE, THAT YOUR BID WAS PREPARED IN ERROR WHICH WAS MADE KNOWN TO THE CONTRACTING OFFICER PRIOR TO AWARD AND THEREFORE NO BINDING CONTRACT WAS LEGALLY CONSUMMATED. IT IS FURTHER ALLEGED THEREIN THAT EVEN IF A BINDING CONTRACT HAD BEEN ACCOMPLISHED THE GOVERNMENT FAILED TO AFFORD YOU THE OPPORTUNITY TO PROCURE THE EQUIPMENT FROM A SOURCE OTHER THAN YOUR CONTEMPLATED SUPPLIER, AND THAT THE AGENCY WAS WITHOUT CONTRACTUAL AUTHORITY TO RELY UPON AN ANTICIPATORY BREACH OF CONTRACT AS GROUNDS FOR CHARGING YOU WITH EXCESS COSTS.

AS YOU WERE ADVISED IN OUR LETTER OF DECEMBER 24, 1957, YOUR PROTEST AND THE BRIEF OF YOUR ATTORNEY WERE REFERRED TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE WITH A REQUEST FOR A COMPLETE REPORT IN THE MATTER, AND BY COVERING LETTER DATED MARCH 27, 1958, THE GENERAL COUNSEL OF THE DEPARTMENT FORWARDED TO US A FINDING OF THE FACTS RELATING TO THE TRANSACTION, AND SUPPORTING PAPERS. THE FINDING ALSO CONTAINS CITATIONS TO THE AUTHORITIES RELIED UPON FOR THE ACTION TAKEN.

THE RECORD DISCLOSES THAT IN RESPONSE TO THE INVITATION INVOLVED YOU SUBMITTED A BID, WITHOUT RESERVATION, TO FURNISH THE DESIRED EQUIPMENT IN STRICT ACCORDANCE WITH THE SPECIFICATIONS MADE A PART OF THE INVITATION. THE BIDS WERE OPENED ON JUNE 27, 1957, AT WHICH TIME A REPRESENTATIVE OF YOUR COMPANY, WHO WAS PRESENT, WAS ADVISED THAT YOUR OFFER APPEARED TO BE THE LOWEST RECEIVED. IN ADDITION TO THE FACT THAT AT THE TIME NO COMMENT WAS OFFERED BY YOUR REPRESENTATIVE AS TO ERROR IN YOUR BID, IT IS NOTED THAT, UNDER THE TERMS OF THE INVITATION, ALL BIDDERS AGREED THAT AFTER OPENING OF THE PROPOSALS NO WITHDRAWAL OF BIDS WAS TO BE CONSIDERED.

YOU ACKNOWLEDGED RECEIPT OF AWARD BY LETTER OF JULY 1, 1957, AND STATED THEREIN THAT SINCE THE EQUIPMENT WAS TO BE TESTED IN ACCORDANCE WITH SPECIFICATION GG-X-635A YOUR BID SHOULD BE CANCELED AND AWARD MADE TO THE NEXT HIGHEST BIDDER. ALSO, IN THE SAME COMMUNICATION, YOU STATED THAT RECENT INFORMATION RECEIVED FROM YOUR SUPPLIER DISCLOSES THAT THE EQUIPMENT YOU OFFERED DOES NOT COMPLY WITH THE SPECIFICATIONS IN SEVERAL RESPECTS. FROM THE FOREGOING IT IS APPARENT THAT THE SITUATION CREATED BY THE SUBMISSION AND ACCEPTANCE OF YOUR BID WAS NOT THE RESULT OF ERROR--- THE EQUIPMENT TENDERED AND THE PRICE QUOTED BEING PRECISELY AS INTENDED--- BUT RATHER THE RESULT OF YOUR FAILURE TO PREVIOUSLY ASCERTAIN WHETHER THE EQUIPMENT YOU CONTEMPLATED FURNISHING ACTUALLY MET THE SPECIFICATIONS, AND YOUR ASSUMPTION, SOLELY AT YOUR OWN RISK, THAT THE GOVERNMENT WOULD NOT EXERCISE THE RIGHT RESERVED TO IT TO HAVE THE EQUIPMENT TESTED.

THE FACTS HERE DIFFER MATERIALLY FROM THOSE INVOLVED IN OUR OFFICE DECISION OF AUGUST 17, 1949, B-86455, CITED BY YOUR ATTORNEY AS AUTHORITY FOR GRANTING YOU RELIEF. THERE AN OBVIOUS MISTAKE WAS MADE (MISPLACED DECIMAL POINT) RESULTING IN A QUOTATION COMPLETELY OUT OF LINE WITH THE OTHER BIDS AND THE KNOWN VALUE OF THE SUPPLIES, WHICH WAS APPARENT TO THE CONTRACTING OFFICER. IN THIS CASE YOUR OFFER WAS NOT MATERIALLY LESS THAN THE NEXT LOWEST BID AND NO ALLEGATION OF ERROR WAS MADE AT THE TIME OF OPENING OF THE BIDS AS WAS DONE IN THE CITED CASE.

WITH RESPECT TO THE CONTENTION OF YOUR ATTORNEY THAT THE TERMINATION OF YOUR CONTRACT WAS PREMATURE, IN THAT YOU WERE NOT PERMITTED TO OBTAIN EQUIPMENT OF ANOTHER MANUFACTURER, THE ESTABLISHED FACTS ARE THAT PERMISSION TO DO SO WAS NOT REQUESTED. RATHER THAN INDICATE TO THE PROCUREMENT OFFICIALS AT ANY TIME THAT YOU WOULD ATTEMPT TO COMPLY WITH THE REQUIREMENTS OF YOUR CONTRACT BY SEEKING A SOURCE OF SUPPLY ELSEWHERE YOU REQUESTED ONLY THAT YOU BE RELEASED FROM YOUR OBLIGATION. NO NOTICE OF INTENT TO PERFORM THE CONTRACT WAS CONVEYED TO THE GOVERNMENT AND THERE IS NOTHING IN THE RECORD TO INDICATE THAT SUCH AN ATTEMPT WAS, IN FACT, MADE BY YOU. THE RECORD SHOWS THAT THE CONTRACTING OFFICER NOTIFIED YOU ON JULY 3, 1957, THAT YOUR REQUEST TO HAVE YOUR BID WITHDRAWN WOULD BE CONSIDERED AS DEFAULTING ON YOUR CONTRACT, AND THAT PURCHASE WOULD BE MADE FROM THE SECOND LOW BIDDER. SINCE IT APPEARS THAT THE GOVERNMENT WAS IN NEED OF THE EQUIPMENT AND SINCE YOU DID NOT INDICATE THAT YOU INTENDED TO FURNISH EQUIPMENT MEETING CONTRACT SPECIFICATIONS, THE GOVERNMENT WAS FACED WITH THE ONLY ALTERNATIVE OF SECURING THE EQUIPMENT FROM OTHER SOURCES.

IN ADDITION TO THE FOREGOING, AND THE SPECIFIC PROVISIONS OF THE INVITATION, THE ACCOUNTING OFFICERS AND THE COURTS HAVE HELD REPEATEDLY THAT PUBLIC BIDS MAY NOT BE WITHDRAWN AFTER THEY HAVE BEEN OPENED EVEN BEFORE AWARD IS MADE AND THAT A RESPONSIVE BIDDER IS BOUND TO ACCEPT THE AWARD. W. A. SCOTT V. UNITED STATES, 44 C.CLS. 524; UNITED STATES V. LIPMAN, 122 F.SUPP. 284; 19 COMP. 761. HENCE, THE ACCEPTANCE OF YOUR BID CREATED A CONTRACT LEGALLY BINDING YOU TO PERFORMANCE OR ANSWER IN DAMAGES FOR THE BREACH OF YOUR OBLIGATIONS. UNITED STATES V. NEW YORK AND PUERTO RICO STEAMSHIP COMPANY, 239 U.S. 88.

IN VIEW OF THE FACTS OF RECORD AND APPLICABLE LAW WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT A BINDING CONTRACT WAS CONSUMMATED AND THAT THE ADMINISTRATIVE AGENCY WAS CORRECT IN CHARGING YOUR ACCOUNT FOR THE DAMAGES (EXCESS COSTS) RESULTING FROM YOUR BREACH.

ARRANGEMENTS SHOULD BE MADE PROMPTLY WITH THE CLAIMS DIVISION OF OUR OFFICE TO LIQUIDATE YOUR INDEBTEDNESS.