B-140932, OCT. 21, 1959

B-140932, OCT. 21, 1959

TO THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO LETTER OF OCTOBER 2, 1959, WITH ENCLOSURES, FROM YOUR DEPUTY FOR PROCUREMENT AND PRODUCTION, TRANSMITTING FOR OUR DECISION THE REQUEST OF HONOLULU OIL REFINERS, LTD., FOR RELIEF IN THE NATURE OF A REFORMATION OF CONTRACT NO. AF 64/605/-S-78, BECAUSE OF AN ERROR STATED TO HAVE BEEN MADE IN ITS BID IN RESPONSE TO INVITATION FOR BIDS NO. 64-605-S- 59-1.

THE RECORD DISCLOSES THAT IN THE ONLY RESPONSE TO THE SAID INVITATION THE CONTRACTOR OFFERED TO PURCHASE AN ESTIMATED QUANTITY OF USED ENGINE OIL TO BE MADE AVAILABLE BY HICKAM AIR FORCE BASE DURING THE PERIOD SET FORTH THEREIN AT A UNIT PRICE OF ?0093 PER POUND; THAT THE UNIT BID PRICE FOR THE ESTIMATED QUANTITY OF 360,000 POUNDS WAS EXTENDED INCORRECTLY AS $334.80 RATHER THAN $3,348; THAT PRIOR CONTRACTS FOR THE SAME COMMODITY HELD BY THE CONTRACTOR WERE BASED ON GALLONS RATHER THAN POUNDS; AND THAT THE CONTRACTOR FAILED TO NOTICE THAT THE INSTANT SOLICITATION REQUESTED A PRICE BASED ON POUNDS. THE CONTRACTING OFFICER REPORTS THAT HE, LIKEWISE, OVERLOOKED THE CHANGE FROM FORMER CONTRACTS IN THE UNIT MEASURE FROM GALLONS TO POUNDS; ALSO, THAT THE EXTENSION ERROR IN THE BID PRICE WAS NOT DETECTED AT THE TIME OF ACCEPTANCE OF THE BID. ADDITIONALLY, IT APPEARS THAT ?0093 PER GALLON IS A FAIR AND REASONABLE PRICE.

FROM THE FOREGOING IT IS APPARENT THAT THE WRITTEN AGREEMENT DID NOT REFLECT THE PROVISIONS UPON WHICH THE PARTIES ASSUMED THEY WERE CONTRACTING, SINCE BOTH OVERLOOKED THE FACT THAT THE PREVIOUSLY USED QUANTITY MEASUREMENT HAD BEEN CHANGED. WHILE NO AMBIGUITY EXISTS IN THE TERMS OF THE SUBJECT CONTRACT, THERE IS NO DOUBT THAT A BONA FIDE ERROR WAS MADE BY THE CONTRACTOR IN QUOTING A UNIT PRICE BASED ON POUNDS RATHER THAN GALLONS, AND THAT THE CONTRACTING OFFICER COMMITTED THE SAME MISTAKE IN ACCEPTING THE OFFER ON THE ASSUMPTION THAT THE UNIT MEASUREMENT WAS UNCHANGED. HAD THE ERROR IN EXTENSION BEEN DETECTED BEFORE AWARD AND BROUGHT TO THE ATTENTION OF THE CONTRACTOR, IT IS REASONABLE TO ASSUME THAT THE OVERSIGHT BY BOTH PARTIES AS TO THE UNIT QUANTITY STIPULATED WOULD HAVE BEEN DISCOVERED. WE CONCUR WITH THE VIEWS EXPRESSED BY THE DEPUTY CHIEF OF STAFF FOR MATERIEL IN REPORT DATED APRIL 23, 1959, THAT, COMPARED TO PRICES PAID UNDER PREVIOUS CONTRACTS, THE ERROR SHOULD HAVE BEEN NOTICED AND A VERIFICATION REQUESTED.

SINCE THE MISTAKE WAS MUTUAL AND RESULTED IN A CONTRACT WHICH DOES NOT CONFORM TO THE REAL INTENTION OF THE PARTIES, WE ARE OF THE OPINION THAT PAYMENT IN FULL FOR THE USED OIL SOLD TO THE CONTRACTOR SHOULD BE ACCEPTED IN AN AMOUNT COMPUTED ON A GALLONAGE BASIS. A COPY OF THIS DECISION SHOULD BE ATTACHED TO THE CONTRACT.