B-139456, JULY 14, 1959, 39 COMP. GEN. 27

B-139456, JULY 14, 1959, 39 COMP. GEN. 27

CONTRACTS - ALLEGATION OF MISTAKE AFTER PERFORMANCE - SPECIFICATION MISINTERPRETATION A CONTRACTOR WHO PROCEEDS WITH PERFORMANCE OF A CONTRACT AFTER RECEIPT OF COMPLETE DRAWINGS, ENTERS INTO A SUPPLEMENTAL AGREEMENT WHICH ACKNOWLEDGES THE CONTRACT TO BE A BINDING AND SUBSISTING AGREEMENT AND COMPLETES DELIVERIES BEFORE ALLEGING A MISTAKE BASED ON FURNISHING A LESS COSTLY ITEM OR PRESENTING A CLAIM FOR ADDITIONAL COMPENSATION MUST BE HELD TO HAVE AFFIRMED THE CONTRACT IN ALL ITS TERMS AND TO HAVE WAIVED WHATEVER RIGHTS HE MIGHT OTHERWISE HAVE HAD ARISING OUT OF THE MISTAKE.

TO THE SECRETARY OF THE ARMY, JULY 14, 1959:

REFERENCE IS MADE TO LETTER DATED APRIL 27, 1959, FROM THE ASSISTANT SECRETARY OF THE ARMY ( LOGISTICS), REQUESTING A DECISION AS TO WHETHER RELIEF MAY BE GRANTED TO GENERAL ELECTRONICS CO., INC., MONTGOMERY, ALABAMA, BECAUSE OF AN ALLEGED MISTAKE IN ITS BID, THE ACCEPTANCE OF WHICH FORMED THE BASIS FOR CONTRACT NO. DA-36-038-OR-20396, DATED JANUARY 15, 1958.

BY INVITATION NO. ORD-36-038-58-M-154, FRANKFORD ARSENAL REQUESTED BIDS TO BE OPENED DECEMBER 30, 1957, FOR FURNISHING 57 UNITS OF ITEM NO. 1, DESCRIBED AS " AMPLIFIER, INTERMEDIATE FREQUENCY, AM-1059 MS, D153884, IN ACCORD. WITH DRAG. E7620695.' ( STOCK AND PART NO. 1230 762-0695, F342). BIDDERS WERE ADVISED IN THE INVITATION THAT CERTAIN DRAWINGS AND SPECIFICATIONS REFERRED TO THEREIN AS APPLICABLE TO THE MANUFACTURE OF THE AMPLIFIERS WERE NOT BEING FURNISHED WITH THE INVITATIONS, BUT THAT THEY COULD BE OBTAINED FROM THE "LOCAL ORDNANCE DISTRICT OFFICE.' BIDDERS WERE ALSO ADVISED IN PARAGRAPH 10 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS AS FOLLOWS:

10. BIDS.

D. MISTAKE. BIDDERS ARE EXPECTED TO EXAMINE THE DRAWINGS, SPECIFICATIONS, CIRCULARS, SCHEDULE, AND ALL INSTRUCTIONS PERTAINING TO THE SUPPLIES OR SERVICES. FAILURE TO DO SO WILL BE AT THE BIDDER'S RISK.

COMPLETE DELIVERY OF THE AMPLIFIERS, THE INSPECTION AND ACCEPTANCE OF WHICH WERE TO TAKE PLACE AT THE CONTRACTOR'S PLANT, WAS TO BE MADE WITHIN 120 DAYS FROM DATE OF AWARD OF THE CONTRACT.

THE RECORD SHOWS THAT TEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION, THE LOWEST OF WHICH WAS THAT SUBMITTED BY GENERAL ELECTRONICS CO., INC., WHICH OFFERED TO FURNISH THE AMPLIFIERS AT THE PRICE OF $87.49 EACH. THE OTHER BIDS RANGED FROM $150 TO $363.43 PER UNIT. FOLLOWING THE OPENING OF BIDS, THE BUYER AT FRANKFORD ARSENAL APPEARS TO HAVE POINTED OUT THAT CONFIRMATION OF THE LOW BID WOULD BE NECESSARY UNDER THE CIRCUMSTANCES, AND BY TELETYPE DATED DECEMBER 30, 1957, THE U.S. ARMY ORDNANCE DISTRICT, BIRMINGHAM, ALABAMA, WAS REQUESTED TO MAKE A PREAWARD SURVEY IN CONNECTION WITH THE BID WHICH HAD BEEN SUBMITTED BY GENERAL ELECTRONICS CO., INC. ON JANUARY 7, 1958, THE COMMANDING GENERAL OF THE BIRMINGHAM ORDNANCE DISTRICT ADVISED THE COMMANDING GENERAL OF FRANKFORD ARSENAL BY TELETYPE AS FOLLOWS:

XREURTT 30043 RQSTING PRE-AWD SURVEY ON GENERAL ELECTRONICS CO., INC., IFB 58-M-154. SPECIFIED MANDATORY DELIVERY SCHEDULE, UNIT PRICE $87.49, TOTAL BID PRICE $4,986.93, CONFIRMED BY CONTRACTOR. SUBJECT FIRM HAS SUFFICIENT PRODUCTIVE CAPACITY, TECHNICAL ABILITY, PLANT FACILITIES AND FINANCES AVAILABLE TO PERFORM IN ACCORDANCE WITH THE REQUIREMENTS OF THE PROPOSED AWARD. FAVORABLE CONSIDERATION IS RECOMMENDED. COMPLETE REPORT FORWARDED BY MAIL. ( ITALICS SUPPLIED.)

ON JANUARY 15, 1958, THE CONTRACT WAS AWARD TO GENERAL ELECTRONICS CO., INC., FOR THE AMOUNT OF ITS BID. ATTACHED TO THE CONTRACT IS MODIFICATION NO. 1, CHANGE ORDER, DATED APRIL 10, 1958, WHEREBY THE CONTRACTING OFFICER, AS AUTHORIZED UNDER THE CONTRACT, DIRECTED THE CONTRACTOR TO DELETE A CERTAIN DRAWING REFERRED TO IN THE SPECIFICATIONS, AND SUBSTITUTE ANOTHER, THE CHANGE ORDER STATING THAT EXCEPT AS MODIFIED THEREIN, THE TERMS OF THE CONTRACT WERE TO REMAIN IN FULL FORCE. ALSO ATTACHED THERETO IS MODIFICATION NO. 2, SUPPLEMENTAL AGREEMENT, WHICH WAS EXECUTED BY THE CONTRACTOR AND THE CONTRACTING OFFICER FOR THE GOVERNMENT UNDER DATE OF SEPTEMBER 5, 1958, AND PROVIDED FOR AN EXTENSION OF TIME UNDER THE CONTRACT TO SEPTEMBER 15, 1958, BECAUSE OF DELAYS IN DELIVERY DUE TO EXCUSABLE CAUSES, AS AUTHORIZED BY ARTICLE 11, DEFAULT, OF THE GENERAL PROVISIONS OF THE CONTRACT.

DELIVERIES UNDER THE CONTRACT WERE COMPLETED ON DECEMBER 11, 1958. HIS MEMORANDUM OF MARCH 17, 1959, THE CONTRACTING OFFICER OF THE BIRMINGHAM ORDNANCE DISTRICT (WHICH IS STATED TO HAVE ACCEPTED THE CONTRACT FOR ADMINISTRATION ON JANUARY 23, 1958) STATES THAT DURING THE PERIOD TO DECEMBER 11, 1958, THE CONTRACTOR EXPERIENCED DIFFICULTIES IN MEETING THE DELIVERY SCHEDULE,"CAUSED IN PART BY CERTAIN DRAWING BEING ILLEGIBLE.' ANY DELAY DUE TO THE LATTER CAUSE WAS, OF COURSE, EXCUSABLE UNDER THE CONTRACT. THE SEVENTH AND FINAL PAYMENT TO THE CONTRACTOR IN THE AMOUNT OF $174.98, REPRESENTING THE BALANCE OF THE TOTAL CONTRACT PRICE OF $4,986.93, WAS MADE ON D.O. VOUCHER NO. 2622, JANUARY, 1959, ACCOUNTS OF T. J. BRANTLEY, F.C., BY TREASURY CHECK NO. 26967, ON JANUARY 13, 1959. FINAL RELEASE FORMS SENT TO THE CONTRACTOR FOR EXECUTION WERE NEVER EXECUTED.

BY LETTER OF DECEMBER 19, 1958, ADDRESSED TO THE CONTRACTING OFFICER, U.S. ARMY ORDNANCE DISTRICT, BIRMINGHAM, ALABAMA, THE CONTRACTOR REQUESTED PAYMENT OF THE ADDITIONAL AMOUNT OF $3,272.09 UNDER THE CONTRACT TO COVER THE LOSS WHICH IT CLAIMED TO HAVE SUSTAINED IN ITS PERFORMANCE. IN ITS LETTER, THE CONTRACTOR CONTENDS IN SUBSTANCE THAT IT MADE A MISTAKE IN SUBMITTING ITS BID IN THAT IT BELIEVED IT WAS BIDDING ON A TYPE OF AMPLIFIER WHICH IS LESS COSTLY TO PRODUCE THAN THE ONE WHICH WAS ACTUALLY REQUIRED TO BE FURNISHED UNDER THE SPECIFICATIONS. THE CONTRACTOR STATES THAT, PRIOR TO SUBMITTING ITS BID, IT CONTACTED THE BIRMINGHAM ORDNANCE DISTRICT AND WAS ADVISED THAT THE PRINTS (DRAWINGS) AND SPECIFICATIONS, REFERRED TO ABOVE AS NOT BEING FURNISHED WITH THE INVITATION, WERE AVAILABLE, AND AN EMPLOYEE WAS SENT TO PICK THEM UP; THAT THE EMPLOYEE RETURNED WITH THE INFORMATION THAT THE PRINTS AND SPECIFICATIONS WERE NOT AVAILABLE FOR HIM TO TAKE ALONG, BUT HE HAD BEEN ALLOWED TO STUDY THEM, AND THAT THE ARTICLE BEING PROCURED WAS ,JUST A TWO STAGE AUDIO AMPLIFIER CONTAINING SO MANY RESISTORS, CONDENSERS, TUBES, ETC.; " AND THAT (INFERENTIALLY) THE CONTRACTOR'S BID WAS PREPARED ON THE BASIS OF SUCH INFORMATION. THE CONTRACTOR FURTHER STATES THAT, AFTER AWARD OF THE CONTRACT, IT REQUESTED A SET OF PRINTS AND SPECIFICATIONS FROM THE BIRMINGHAM ORDNANCE DISTRICT AND THAT "PROPER PRINTS AND SPECIFICATIONS WERE FORWARDED TO US ON 22 JANUARY 1958.; " THAT UPON FURTHER INVESTIGATION IT FOUND OUT THAT THE EMPLOYEE INVOLVED, WHO IS NO LONGER WITH THE COMPANY, NEVER WENT TO THE BIRMINGHAM ORDNANCE DISTRICT OFFICE; AND THAT THE INFORMATION WHICH HE GAVE WAS FICTITIOUS.

BY LETTER OF FEBRUARY 2, 1959, THE BIRMINGHAM ORDNANCE DISTRICT, LEGAL OFFICE, FORWARDED THE ABOVE LETTER TO THE COMMANDING OFFICER, FRANKFORD ARSENAL, FOR THE ATTENTION OF MR. HARRY P. EDWARDS, CONTRACTING OFFICER (WHO HAD AWARDED THE CONTRACT INVOLVED), FOR COMMENT, WITH PARTICULAR REFERENCE TO WHETHER OR NOT THE CONTRACTOR'S BID PRICE HAD BEEN CONFIRMED PRIOR TO AWARD AND, IF SO, WHETHER GENERAL ELECTRONICS HAD BEEN ADVISED THAT ITS BID WAS SUBSTANTIALLY LOWER THAN THE NEXT LOWEST BIDDER. THE CONTRACTING OFFICER IN QUESTION, BY FIRST ENDORSEMENT OF FEBRUARY 13, 1959, ON BEHALF OF THE COMMANDING OFFICER OF FRANKFORD ARSENAL, ADVISED THE COMMANDING OFFICER OF THE BIRMINGHAM ORDNANCE DISTRICT THAT THE CONTRACT HAD BEEN AWARDED ON BASIS OF THE INFORMATION GIVEN IN BIRMINGHAM ORDNANCE DISTRICT'S ABOVE QUOTED TELETYPE OF JANUARY 7, 1958, WHICH INDICATED, AMONG OTHER THINGS, THAT GENERAL ELECTRONICS HAD CONFIRMED ITS BID PRICE. THE CONTRACTING OFFICER STATED THAT IT WAS ASSUMED THAT THE BIRMINGHAM ORDNANCE DISTRICT, IN OBTAINING PRICE CONFIRMATION, HAD FULFILLED "THE GOVERNMENT'S RESPONSIBILITY FOR ASCERTAINMENT OF THE CORRECTNESS OF THE BID," IN VIEW OF WHICH NO FURTHER ACTION IN THIS RESPECT HAD BEEN TAKEN BY FRANKFORD ARSENAL. IN COMMENTING ON THE AMOUNT OF GENERAL ELECTRONIC'S BID IN RELATION TO THE OTHER BIDS, THE CONTRACTING OFFICER STATED:

* * * FROM ABSTRACT OF BIDS, IT APPEARS ITS PRICE IS CONSIDERABLY OUT OF LINE WITH THE GENERAL BID PATTERN; HOWEVER, THIS ARSENAL PURCHASED THE SAME ITEM THROUGH ADVERTISING FROM A PHILADELPHIA SOURCE IN JUNE 1957 AT A UNIT PRICE OF $118.30. WHILE THE LATTER PRICE IS LOWER THAN THE QUOTATIONS ON THE SUBJECT INVITATION, IT IS STILL APPROXIMATELY 35 PERCENT HIGHER THAN THE CURRENT AWARD FIGURE AND APPEARS TO POINT UP THE POSSIBILITY THAT GENERAL ELECTRONICS, IN FACT, MADE AN ERROR IN THE SUBMISSION OF ITS BID. * * *

IN A MEMORANDUM DATED MARCH 17, 1959, TO THE CHIEF OF ORDNANCE, WITH REFERENCE TO THE MATTER, THE SUCCESSOR CONTRACTING OFFICER STATES THAT HE IS OF THE OPINION THAT THE CONTRACTOR MADE A BONA FIDE MISTAKE IN THE SUBMISSION OF ITS BID, AND HE RECOMMENDS APPROVAL OF THE CLAIM IN THE AMOUNT OF $2,820.92, THIS BEING THE AMOUNT OF THE ADDITIONAL COSTS CLAIMED BY THE CONTRACTOR WHICH WERE FOUND TO BE ACCEPTABLE BY THE ARMY AUDIT AGENCY AS A RESULT OF AN AUDIT OF THE CONTRACTOR'S RECORDS. THE BASIS FOR THE SUCCESSOR CONTRACTING OFFICER'S APPROVAL OF THE CLAIM TO THE EXTENT INDICATED IS THAT THE WIDE DISCREPANCY BETWEEN GENERAL ELECTRONICS' BID AND THE NEXT LOWEST BID, AS WELL AS THE PREVIOUS PROCUREMENT EXPERIENCE, REFERRED TO ABOVE, WAS SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR THEREIN AND TO CAST UPON HIM THE DUTY OF OBTAINING A VERIFICATION OF THE BID. RELATIVE THERETO, THE SUCCESSOR CONTRACTING OFFICER STATES THAT THE CONFIRMATION OF THE BID WHICH WAS OBTAINED DURING THE PREAWARD SURVEY WAS MERELY A "GENERAL CONFIRMATION" AND THE CONTRACTOR "WAS NOT ADVISED SPECIFICALLY OF THE WIDE DISCREPANCY IN THE DS.' THIS, THE SUCCESSOR CONTRACTING OFFICER CONTENDS, FELL SHORT OF SATISFYING THE REQUIREMENTS.

THE OFFICE OF THE CHIEF OF ORDNANCE IN A MEMORANDUM DATED APRIL 14, 1959, CONCURS WITH THE VIEWS AND RECOMMENDATION OF THE SUCCESSOR CONTRACTING OFFICER IN THE MATTER.

EVEN CONCEDING THAT THE CONTRACTOR MADE THE MISTAKE IN ITS BID AS ALLEGED, THAT THE WIDE DISCREPANCY BETWEEN THE BID AND THAT OF THE NEXT LOWEST BIDDER WAS SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF ERROR THEREIN, AND THAT THE GOVERNMENT DID NOT FULFILL ITS RESPONSIBILITY WITH RESPECT TO OBTAINING A VERIFICATION OF THE BID, WE STILL FIND NO LEGAL BASIS FOR ALLOWANCE OF THE CLAIM. THESE CIRCUMSTANCES, AT MOST, MIGHT HAVE ENTITLED THE CONTRACTOR TO RESCIND THE CONTRACT WHEN IT RECEIVED THE PRINTS AND SPECIFICATIONS FORWARDED TO IT BY THE BIRMINGHAM ORDNANCE DISTRICT ON JANUARY 22, 1958, AND DISCOVERED ITS MISTAKE, IT BEING WELL ESTABLISHED THAT A UNILATERAL MISTAKE MAY BE A GROUND FOR RESCINDING, BUT NOT FOR REFORMING, A CONTRACT. HEARNE V. MARINE INSURANCE CO., 87 U.S. 488, 491. HOWEVER, EVEN AFTER RECEIPT OF THE COMPLETE DRAWINGS, THE CONTRACTOR PROCEEDED WITH THE PERFORMANCE OF THE CONTRACT ENTERED INTO A SUPPLEMENTAL AGREEMENT WHICH ACKNOWLEDGED THE CONTRACT TO BE A BINDING AND SUBSISTING AGREEMENT, AND COMPLETED DELIVERIES THEREUNDER, BEFORE IT ALLEGED ANY MISTAKE OR PRESENTED ANY CLAIM FOR ADDITIONAL COMPENSATION. IN THESE CIRCUMSTANCES, THE CONTRACTOR MUST BE HELD TO HAVE AFFIRMED THE CONTRACT IN ALL ITS TERMS, AND TO HAVE WAIVED WHATEVER RIGHTS IT MAY OTHERWISE HAVE HAD ARISING OUT OF THE MISTAKE. SEE BOARD OF TRUSTEES OF NATIONAL TRAINING SCHOOL FOR BOYS V. O. D. WILSON CO., INC., 133 F.2D 399; ROAD COMPANY V. BOARD OF PUBLIC INSTRUCTION, 102 SO.2D 139; HOBE LUMBER CO. V. MCGRATH ET AL., 112 N.W. 1053, 1054; EASTERN STATES PETROLEUM CO. V. UNIVERSAL OIL PRODUCTS CO., 49 A. 2D 612, 615; STALY V. MCNERNEY, 10 N.W. 2D 584; STATE V. COTE ET AL., 65 A. 693, 698; JOHN MONKS AND SONS V. WEST STREET IMPROVEMENT CO., ET AL., 134 N.Y.S. 39, 44; GRANT MARBLE CO. V. ABBOT, 124 N.W. 264, 268; MILFORD YACHT REALTY CO. V. MILFORD YACHT CLUB, 72 A.2D 482, 485; BRENDESE V. CITY OF SCHENECTADY ET AL., 85 N.Y.S. 2D 856, 861; ANDERSON V. ANDERSON ET AL., 96 N.E. 265, 267; 17 C.J.S. CONTRACTS, SECS. 446, 448; RESTATEMENT, CONTRACTS, SECS. 510, 484.

IT FOLLOWS THAT PAYMENT TO THE CONTRACTOR OF ANY AMOUNT IN ADDITION TO THE CONTRACT PRICE WOULD BE UNAUTHORIZED.

SENATOR SPARKMAN IS BEING FURNISHED A COPY OF THE PRESENT DECISION, AS REQUESTED IN YOUR LETTER, AND THE ENCLOSURES TRANSMITTED WITH YOUR LETTER ARE RETURNED HEREWITH.