B-135008, MAR. 19, 1958

B-135008: Mar 19, 1958

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED JANUARY 22. THE CONTRACT WAS TO BE LET ON A TOTAL AMOUNT BASIS. 500 FOR THE ENTIRE PROJECT WERE RECEIVED AND OPENED AS SCHEDULED ON OCTOBER 29. WAS THE LOWEST BID RECEIVED. WERE SO LOW. A CONFERENCE WAS ARRANGED FOR NOVEMBER 1 TO DISCUSS THAT BID. MADDY'S ATTENTION WAS CALLED PARTICULARLY TO THE SUBSTANTIAL DISPARITY BETWEEN HIS COMPANY'S UNIT BID PRICE OF $0.90 PER CUBIC YARD FOR CHANNEL EXCAVATION UNDER ITEM NO. 2 AND THE BID OF $3 ON THAT ITEM BY EACH OF THE NEXT TWO LOW LOW BIDDERS. MADDY WAS ADVISED OF THE COMPANY'S RIGHT TO FILE A CLAIM OF MISTAKE IN BID AND THAT. IN SUCH A CLAIM WERE FILED. CONSIDERATION WOULD BE GIVEN TO REVISION OF THE BID PROVIDED SUPPORTING DATA WERE FURNISHED BOTH AS TO THE COMPANY'S MISTAKE AND ITS INTENDED BID PRICE.

B-135008, MAR. 19, 1958

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED JANUARY 22, 1958, WITH ENCLOSURES, FROM ASSISTANT SECRETARY OF THE ARMY (LOGISTICS), REQUESTING A DECISION WITH REGARD TO THE REQUEST OF W. R. MADDY AND COMPANY, 1499 RITTER BOULEVARD, HUNTINGTON, WEST VIRGINIA, FOR RESCISSION OF CONTRACT NO DA-46-022-CIVENG- 58-94.

ON OCTOBER 10, 1957, THE UNITED STATES ARMY ENGINEER DISTRICT, HUNTINGTON, WEST VIRGINIA, ISSUED AN INVITATION FOR BIDS FOR CLEARING AND STRAIGHTENING THE CHERRY RIVER CHANNEL, AT RICHWOOD, WEST VIRGINIA. THE CONTRACT WAS TO BE LET ON A TOTAL AMOUNT BASIS, BUT THE INVITATION CALLED FOR PRICE QUOTATIONS ON THE SEPARATE ITEMS OF THE WORK TO BE DONE.

IN RESPONSE TO THE INVITATION, SIX BIDS RANGING FROM $6,995 TO $29,500 FOR THE ENTIRE PROJECT WERE RECEIVED AND OPENED AS SCHEDULED ON OCTOBER 29, 1957. THE BID OF W. R. MADDY AND COMPANY, TOTALING $6,995 FOR THE PROJECT, WAS THE LOWEST BID RECEIVED.

UPON REVIEW OF THE BIDS, THE CONTRACTING OFFICER CONCLUDED THAT W. R. MADDY AND COMPANY'S TOTAL BID, AND PARTICULARLY ITS QUOTATION ON ITEM NO. 2 FOR CHANNEL EXCAVATION, WERE SO LOW, WHEN COMPARED WITH THE GOVERNMENT'S TOTAL ESTIMATE OF $12,320 AND THE OTHER BIDS RECEIVED, AS TO INDICATE AN ERROR IN THE BID. BY TELEPHONE, ON OCTOBER 30, 1957, A REPRESENTATIVE OF THE CONTRACTING OFFICER QUESTIONED MR. W. R. MADDY, OWNER OF THE COMPANY, AS TO THE REASONABLENESS OF THE COMPANY'S OVER ALL BID, AND A CONFERENCE WAS ARRANGED FOR NOVEMBER 1 TO DISCUSS THAT BID. AT THE CONFERENCE, MR. MADDY'S ATTENTION WAS CALLED PARTICULARLY TO THE SUBSTANTIAL DISPARITY BETWEEN HIS COMPANY'S UNIT BID PRICE OF $0.90 PER CUBIC YARD FOR CHANNEL EXCAVATION UNDER ITEM NO. 2 AND THE BID OF $3 ON THAT ITEM BY EACH OF THE NEXT TWO LOW LOW BIDDERS, AND ALSO THE ESTIMATE OF THE GOVERNMENT OF $1.90 FOR THAT ITEM. MR. MADDY WAS ADVISED OF THE COMPANY'S RIGHT TO FILE A CLAIM OF MISTAKE IN BID AND THAT, IN SUCH A CLAIM WERE FILED, CONSIDERATION WOULD BE GIVEN TO REVISION OF THE BID PROVIDED SUPPORTING DATA WERE FURNISHED BOTH AS TO THE COMPANY'S MISTAKE AND ITS INTENDED BID PRICE, OR CONSIDERATION WOULD BE GIVEN TO PERMIT WITHDRAWAL OF THE COMPANY'S BID IF IT COULD NOT PROVE ITS INTENDED BID PRICE. MR. MADDY THEN STATED THAT HE DID NOT HAVE ANY WORKSHEETS COVERING THE BID AS SUBMITTED, THAT HE DID NOT HAVE ANY WORK AT THE PRESENT TIME, AND THAT HE WANTED TO TAKE ON THE JOB AND WOULD DO SO AT THE COMPANY'S BID PRICE. THE CONCLUSION OF THE CONFERENCE, BY LETTER DATED NOVEMBER 1, 1957, ADDRESSED TO THE CONTRACTING OFFICER, MR. MADDY CONFIRMED HIS COMPANY'S BID AS SUBMITTED AND REQUESTED THAT, AT THE EARLIEST CONVENIENCE OF THE CONTRACTING OFFICER, A CONTRACT BE PREPARED AND FURNISHED HIM FOR EXECUTION.

THEREAFTER, UPON THE BASIS OF A PREAWARD SURVEY WHICH INCLUDED A CHECK WITH THE CITY MANAGER, IRONTON, OHIO, FOR WHOM W. R. MADDY HAD RECENTLY PERFORMED SIMILAR WORK SUCCESSFULLY AND AFTER REVIEW OF THE LOW BIDDER'S FINANCIAL STATEMENT, THE CONTRACTING OFFICER DETERMINED THAT W. R. MADDY AND COMPANY WAS FINANCIALLY RESPONSIBLE AND CAPABLE OF SATISFACTORY PERFORMANCE OF THE WORK HERE INVOLVED. BY LETTER DATED NOVEMBER 4, 1957, THE CONTRACTING OFFICER ADVISED W. R. MADDY AND COMPANY THAT ITS BID IN THE ESTIMATED AMOUNT OF $6,995 FOR PERFORMANCE OF THE WORK AS ADVERTISED HAD BEEN ACCEPTED SUBJECT TO ACCOMPLISHMENT OF THE CONTRACT, AND PERFORMANCE AND PAYMENT BONDS. FORMAL CONTRACT NO. DA-46-022-CIVENG-58-94 WAS FORWARDED TO MR. MADDY FOR PROMPT EXECUTION OF ALL COPIES OF THE CONTRACT AND BONDS, AND RETURN OF THE ORIGINAL OF THE CONTRACT AND THE ORIGINAL AND DUPLICATES OF THE REQUIRED BONDS.

THE CONTRACTOR DID NOT EXECUTE AND RETURN THE CONTRACT PAPERS ENCLOSED WITH THE NOTICE OF AWARD. BUT, AT FURTHER, CONFERENCES ON NOVEMBER 8 AND 12, 1957, REQUESTED BY MR. MADDY, AND BY LETTER DATED NOVEMBER 14, 1957, THE CONTRACTOR REQUESTED RESCISSION OF THE CONTRACT. MR. MADDY TOOK THE POSITION THAT:

1. DUE TO THE NATURE AND CHARACTER OF THE PROJECT HE WAS NOT COMPETENT TO BID UPON SAME.

2. HE WAS COMPLETELY MISTAKEN AS TO THE NATURE, CHARACTER, AND EXTENT OF THE WORK CONTEMPLATED. AT THE TIME OF HIS SITE INVESTIGATION, THE RIVER WAS AT HIGH STAGE. IT WAS ONLY AFTER CONFIRMATION OF HIS BID AND AWARD OF THE CONTRACT, WHEN HE AGAIN VISITED THE SITE, THAT THE MAGNITUDE OF THE JOB BECAME APPARENT TO HIM.

3. AS TO THE PRICE WHICH HE BID FOR ITEM NO. 2, CHANNEL EXCAVATION, HE FAILED TO INCLUDE THE TOTAL AMOUNT OF $7,800 SUGGESTED BY A MR. JOHN E. GREENE, WHO ASSISTED IN THE SURVEY OF THE PROJECT AND CALCULATION OF HIS BID, AND INADVERTENTLY BID $3,150 INSTEAD FOR ITEM NO. 2, THUS MAKING A MISTAKE IN BID IN THE AMOUNT OF $4,655 ON THAT ITEM.

4. DURING THE FIRST CONFERENCE PRIOR TO AWARD AT THE TIME HIS ATTENTION WAS CALLED TO POSSIBLE ERROR IN BID AND WHEN HE CONFIRMED HIS BID, THE WORKSHEETS UPON WHICH HIS BID WAS CALCULATED WERE NOT CONSULTED BY HIM, NOR WERE THE ITEMS UPON WHICH THE BID WAS PREDICATED EXAMINED IN DETAIL, AND IT WAS NOT UNTIL AFTER THE CONFERENCE THAT HE DISCOVERED THE ERROR IN BID.

5. BECAUSE OF THE EXTREME DIFFERENCE BETWEEN HIS BID AND THE GOVERNMENT ESTIMATE AND OTHER BIDS RECEIVED, HE IS UNABLE TO SECURE AND FURNISH PERFORMANCE AND PAYMENT BONDS AS REQUIRED.

6. THE CONTRACTING OFFICER ERRED IN DETERMINING THAT HE WAS A RESPONSIBLE BIDDER, AND HAD A FURTHER EXAMINATION BEEN MADE IN THIS RESPECT THE CONTRACT WOULD NOT HAVE BEEN AWARDED TO HIM.

IN SUPPORT OF THE ALLEGATION OF ERROR IN THE BID OF W. R. MADDY AND COMPANY, AFFIDAVITS BY W. R. MADDY AND JOHN E. GREENE, AND THEIR RESPECTIVE ORIGINAL WORKSHEETS WERE SUBMITTED. MR. GREEN'S AFFIDAVIT CONTAINED THE STATEMENT THAT, AT THE REQUEST OF MR. MADDY, HE MADE A CALCULATION OF AN ESTIMATE FOR MR. MADDY TO USE IN SUBMITTING A BID ON THE ADVERTISED WORK; THAT HIS CALCULATION AS TO ITEM NO. 2 FOR CHANNEL EXCAVATION WAS BASED ON REMOVING AN ESTIMATED 3,500 YARDS AT $2.23 PER YARD, OR AN ESTIMATED TOTAL OF $7,800 ($7,805) FOR THAT ITEM; AND THAT AS A RESULT OF HIS CALCULATIONS ON ALL THREE ITEMS OF THE INVITATION HE ADVISED MR. MADDY TO BID APPROXIMATELY A TOTAL OF $12,000 FOR THE PROJECT.

IN HIS AFFIDAVIT, MR. MADDY STATED THAT HE INADVERTENTLY CALCULATED THE CHANNEL EXCAVATION (ITEM NO. 2) ON THE BASIS OF REMOVING 3,500 CUBIC YARDS AT A COST OF ONLY $3,150, INSTEAD OF $7,800 ($7,805) AS SUGGESTED BY MR. GREENE, WHICH RESULTED IN AN ERROR OF $4,655 IN HIS COMPANY'S BID PRICE ON THAT ITEM.

IN SUPPORT OF HIS REQUEST FOR RESCISSION OF THE CONTRACT, MR. MADDY ALSO SUBMITTED LETTERS, DATED NOVEMBER 12, 1957, FROM THE UNITED STATES FIDELITY AND GUARANTY COMPANY--- WHO FURNISHED THE BID BOND OF $3,000 ACCOMPANYING THE COMPANY'S BID--- AND FROM THE CARSON INSURANCE COMPANY, OF CHARLESTON, WEST VIRGINIA, IN WHICH EACH COMPANY RESPECTIVELY ADVISED MR. MADDY THAT IT DECLINED TO PROVIDE A PERFORMANCE AND PAYMENT BOND ON THE INVOLVED WORK INASMUCH AS THE MADDY COMPANY'S BID OF $6,995 WAS FAR BELOW THE GOVERNMENT'S ESTIMATE FOR THE PROJECT AND ALSO THE BIDS OF THE NEXT TWO LOW BIDDERS, AND AS IT WAS THE BONDING COMPANY'S OPINION THAT IT WAS FINANCIALLY IMPOSSIBLE FOR THE COMPANY TO DO THE WORK FOR $6,995.

IN HIS FINDINGS OF FACTS, DATED NOVEMBER 27, 1957, THE CONTRACTING OFFICER OFFICER STATED THAT, UPON A REVIEW OF THE FACTS BEFORE HIM AT THE TIME OF MAKING THE AWARD AND AS DISCLOSED IN CONFERENCES WITH MR. MADDY AND IN ADDITIONAL DATA PRESENTED BY MR. MADDY AFTER AWARD OF THE CONTRACT, IT WAS APPARENT THAT A BONA FIDE MISTAKE WAS MADE IN THE COMPANY'S BID AS SUBMITTED, AND HAD HE BEEN AWARE OF THE MISTAKE PRIOR TO AWARD OF THE CONTRACT, HE WOULD HAVE WITHHELD AWARD OF THE CONTRACT AND WOULD HAVE RECOMMENDED TO THE CHIEF OF ENGINEERS THAT W. R. MADDY AND COMPANY BE PERMITTED TO WITHDRAW ITS BID. THE CONTRACTING OFFICER ALSO STATED THAT, NOTWITHSTANDING HIS PREAWARD DETERMINATION THAT THE COMPANY WAS FINANCIALLY RESPONSIBLE AND CAPABLE OF PERFORMING THE WORK REQUIRED UNDER THE CONTRACT, THERE WAS PRESENT, PRIOR TO AWARD, EVIDENCE OF IRRESPONSIBILITY ON THE PART OF MR. MADDY, OWNER OF THE COMPANY; AND THAT HE HAD ERRED IN DETERMINING THAT W. R. MADDY AND COMPANY WAS A RESPONSIBLE BIDDER, AND THAT HAD FURTHER PREAWARD INVESTIGATION BEEN MADE IN THIS RESPECT THE AWARD WOULD NOT HAVE BEEN MADE TO THE CONTRACTOR. THE CONTRACTING OFFICER FURTHER STATED THAT, IN HIS OPINION, TO REQUIRE THE CONTRACTOR TO PERFORM THE WORK CALLED FOR UNDER THE CONTRACT OR TO SUFFER DAMAGES TO THE EXTENT OF THE COST TO THE UNITED STATES OVER AND ABOVE THE AMOUNT OF ITS BID PRICE IN HAVING SUCH WORK DONE BY ANOTHER CONTRACTOR, WOULD VISIT SUCH FINANCIAL DISTRESS AND HARDSHIP UPON THE CONTRACTOR AS TO BE UNCONSCIONABLE.

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, THE LAW IS WELL SETTLED, HOWEVER, THAT THE GOVERNMENT MUST BE HELD TO THE SAME GENERAL PRINCIPLES OF EQUITY AND FAIR PLAY IN DEALING WITH THOSE WHO CONTRACT WITH IT AS ARE THE CONTRACTORS THEMSELVES. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.CLS. 120, 162, 163, AND KEMP V. UNITED STATES, 38 F.SUPP. 568, 570. IN OTHER WORDS, THE COURTS HAVE RECOGNIZED THAT THE SOVEREIGN IS NOT ENTITLED TO TAKE UNCONSCIONABLE ADVANTAGE OF ITS SPECIAL STATUS AS A GOVERNING BODY. SEE STATE OF CONNECTICUT V. F. H. MCGRAW AND COMPANY, 41 F.SUPP. 369, 374.

THE RECORD INDICATES THAT THE CONTRACTING OFFICER ISSUED THE AWARD TO W. R. MADDY AND COMPANY, RELYING UPON THE OWNER'S CONFIRMATION--- WITHOUT REFERENCE TO HIS WORKSHEETS--- OF THE COMPANY'S BID, AT BOTH A PREAWARD CONFERENCE ON NOVEMBER 1, 1957, AND IN A LETTER OF THE SAME DATE. THERE APPEARS TO BE LITTLE, IF ANY, DOUBT CONCERNING THE EXISTENCE OF A BONA FIDE ERROR IN THE PREPARATION OF THE CONTRACTOR'S PROPOSAL AND IT WOULD BE INEQUITABLE TO ENFORCE THE CONTRACT.

IN VIEW OF ALL THE CIRCUMSTANCES, PARTICULARLY SINCE IT IS UNDERSTOOD THAT THE CONTRACTOR HAS NOT EXECUTED THE CONTRACT PAPERS OR FURNISHED A PERFORMANCE OR PAYMENT BOND, AND NO NOTICE TO PROCEED WITH THE WORK HAS BEEN ISSUED, THE AWARD SHOULD BE CANCELED, AS RECOMMENDED BY THE CONTRACTING OFFICER, WITHOUT LIABILITY TO THE COMPANY.

THE UNDATED ADMINISTRATIVE REPORT; THE CONTRACTING OFFICER'S FINDINGS OF FACT, DATED NOVEMBER 27, 1957; THE RESPECTIVE AFFIDAVITS AND ORIGINAL WORKSHEETS OF MR. JOHN E. GREENE AND OF MR. W. MADDY; AND THE ABSTRACT OF BIDS ARE RETAINED. THE OTHER PAPERS ARE RETURNED.