B-140746, SEP. 29, 1959

B-140746, SEP. 29, 1959

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 14, 1959 (R11.2 L8/L8/NT4- 28), WITH ENCLOSURES, FROM CAPTAIN P. L. WEINTRAUB, JR., SC, USN, ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, RELATING TO THE MISTAKE IN BID ALLEGED BY AIRCRAFT EQUIPMENT AND SALVAGE, 6160 FOURTH AVENUE SOUTH, SEATTLE 8, WASHINGTON, AFTER AWARD OF SALES CONTRACT NO. N228S-41626 (SALES INVITATION NO. B-12-60-228), ISSUED BY THE NAVAL SUPPLY CENTER, OAKLAND, CALIFORNIA. IN VIEW OF THE FACTS SET FORTH IN THE ENCLOSURES TO THE LETTER OF SEPTEMBER 14, 1959, OUR DECISION IS REQUESTED AS TO WHETHER THE AWARD OF ITEM 44C OF THE CONTRACT PROPERLY MAY BE CANCELLED AS RECOMMENDED BY THE CONTRACTING OFFICER.

THE RECORD SHOWS THAT BY THE CITED INVITATION DATED JULY 1, 1959, THE NAVAL SUPPLY CENTER OFFERED FOR SALE CERTAIN GOVERNMENT-OWNED SURPLUS PROPERTY CONSISTING OF AVIATION MATERIALS LOCATED AT THE NAVAL AIR STATION, ALEMEDA, CALIFORNIA, THE BIDS TO BE OPENED AT 1 P.M. ON JULY 22, 1959, IN RESPONSE THERETO, AIRCRAFT EQUIPMENT AND SALVAGE SUBMITTED A HIGH BID OF $1.58 EACH FOR ITEM 44C, CONSISTING OF 75 AMPLIFIERS HAVING AN ACQUISITION COST OF $10,800. FOUR OTHER BIDS WERE RECEIVED FOR THIS ITEM RANGING IN PRICE FROM $0.13 TO $0.51 PER UNIT. A CONTRACT WAS AWARDED TO AIRCRAFT EQUIPMENT AND SALVAGE ON JULY 24, 1959, ON THE BASIS THAT ITS BID WAS THE HIGHEST RECEIVED, AND THE CONTRACT AND INSTRUCTIONS WERE MAILED TO THE CONTRACTOR ON JULY 28, 1959, REMOVAL OF THE AMPLIFIERS TO BE EFFECTED ON AUGUST 12, 1959.

IT APPEARS FROM THE REPORT OF THE CONTRACTING OFFICER THAT BY TELEPHONE ON JULY 29, 1959, THE CONTRACTOR ADVISED THAT ITS BID PLACED AGAINST ITEM 44C WAS INTENDED FOR ITEM 45C. BY LETTER OF THE SAME DAY THE CONTRACTOR CONFIRMED THIS, STATING THAT AN ERROR HAD BEEN MADE IN THAT THE BID OF $1.58 PER UNIT WAS INTENDED TO APPLY TO ITEM 45C, CONSISTING OF 314 OXYGEN CYLINDERS, AND CORRECTION OF THE BID WAS REQUESTED. WITH THE LETTER THERE WAS SUBMITTED THE CONTRACTOR'S WORKSHEET WHICH TENDS TO SUBSTANTIATE THE CONTRACTOR'S CLAIM OF ERROR, IN THAT IT LISTED ITEM 45C AMONG THE ITEMS ON WHICH IT INTENDED TO BID, AND DID NOT LIST ITEM 44C. THE UNIT PRICE FIGURE OPPOSITE ITEM 45C IS, HOWEVER, ILLEGIBLE, AND THE TOTAL PRICE IS WRITTEN AS $496.12. WHILE THIS TOTAL DIVIDED BY 314, THE NUMBER OF UNITS OF ITEM 45C, GIVES A UNIT PRICE OF $1.58, THAT FIGURE APPEARS ON THE WORKSHEET AS A UNIT PRICE FOR ITEM 23, WHICH IS THE NEXT ITEM ABOVE 45C ON THAT LIST.

THERE WAS A BID DEPOSIT OF $175 COVERING THE SEVERAL ITEMS AS TO WHICH BIDS WERE SUBMITTED, WHICH APPEARS TO HAVE BEEN CALCULATED ON THE BASIS OF THE TOTAL SHOWN ON THE WORKSHEET RATHER THAN ON THE BIDS ACTUALLY SUBMITTED. BY LETTER OF AUGUST 5, 1959, THE CONTRACTING OFFICER ADVISED THE CONTRACTOR THAT THE SUM OF $23.70, REPRESENTING TWENTY PERCENT OF THE BID PRICE ON ITEM 44C, WOULD BE RETAINED UNTIL A DECISION WAS REACHED RESPECTING THE ALLEGED MISTAKE IN BID AND THAT THE BALANCE OF THE PAYMENT APPLICABLE TO ITEM 44C, $94.80, WOULD BE REFUNDED TO THE CONTRACTOR WITHIN A FEW DAYS.

IN RECOMMENDING THAT THE AWARD OF ITEM 44C TO AIRCRAFT EQUIPMENT AND SALVAGE BE CANCELLED WITHOUT PENALTY TO THE CONTRACTOR, THE CONTRACTING OFFICER POINTS OUT THAT THE CONTRACTOR'S BID ON ITEM 44C IS 3.10 TIMES HIGHER THAN THE NEXT HIGH BID RECEIVED, AND THAT IF THE BID HAD BEEN APPLIED TO ITEM 45C IT WOULD NOT HAVE BEEN HIGH, BUT WOULD HAVE BEEN IN LINE WITH THE OTHER BIDS RECEIVED AS TO THAT ITEM. HOWEVER, THE CONTRACTING OFFICER STATES THAT THERE WAS NO EVIDENCE ON THE FACE OF THE BID TO ALERT HIM TO THE POSSIBILITY OF ERROR AND THAT, THEREFORE, NO EFFORT WAS MADE TO HAVE THE BID CONFIRMED.

THE PRIMARY QUESTION FOR CONSIDERATION IS NOT WHETHER AN ERROR WAS MADE IN THE BID AS CLAIMED, BUT WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY THE ACCEPTANCE THEREOF. THE ESTABLISHED RULE IS THAT ACCEPTANCE OF A BID, IN THE ABSENCE OF MUTUAL MISTAKE OR OF THE CONTRACTING OFFICER ACCEPTING THE BID HAVING NOTICE--- ACTUAL OR CONSTRUCTIVE--- OF SUCH CIRCUMSTANCES AS WOULD MAKE HIS ACCEPTANCE AN ACT OF BAD FAITH, RESULTS IN A VALID AND BINDING CONTRACT.

THE CONTRACTING OFFICER REPORTS THAT THERE WAS NO EVIDENCE ON THE FACE OF THE BID TO ALERT HIM TO THE POSSIBILITY OF ERROR. THE CLAIMANT'S BID IN THIS CASE WAS CONSIDERABLY HIGHER THAN THE OTHER BIDS RECEIVED--- BUT IT ALSO WAS LESS THAN HALF THE AMOUNT OF FOUR BIDS RECEIVED ON THE ITEM FOR WHICH THE CLAIMANT SAYS IT WAS INTENDED. HOWEVER, THIS WAS A SALE OF GOVERNMENT SURPLUS PROPERTY AND, IN VIEW OF THE WIDE RANGE OF BIDS ORDINARILY RECEIVED ON SUCH PROPERTY, A MERE DIFFERENCE IN THE PRICE BID WOULD NOT NECESSARILY PLACE A CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN A BID FOR THE PURCHASE OF SUCH PROPERTY AS WOULD A LIKE DIFFERENCE IN THE PRICES QUOTED ON NEW EQUIPMENT, SUPPLIES, ETC., TO BE FURNISHED THE GOVERNMENT. 28 COMP. GEN. 550. CONSEQUENTLY, WE CONCLUDE THAT THE ACCEPTANCE OF THE BID IN THIS CASE WAS IN GOOD FAITH--- NO ERROR HAVING BEEN ALLEGED UNTIL AFTER AWARD--- AND, IN THE CIRCUMSTANCES, CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND OBLIGATIONS OF THE PARTIES. 36 COMP. GEN. 27, 30.

UPON THE BASIS OF THE FACTS IN THIS CASE, WE FIND NO LEGAL BASIS FOR CANCELLING THE CONTRACT OR FOR GRANTING RELIEF TO THE CONTRACTOR, AS RECOMMENDED BY THE CONTRACTING OFFICER. THE WITHHOLDING OF TWENTY PERCENT OF THE CONTRACT PRICE--- SEE THE CONTRACTING OFFICER'S LETTER OF AUGUST 5, 1959--- APPEARS TO BE AUTHORIZED BY PARAGRAPH 18 OF THE GENERAL SALE TERMS AND CONDITIONS, AND IS APPROVED.