B-141399, DEC. 22, 1959

B-141399: Dec 22, 1959

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO A LETTER (R11.2 L8) L8/NT4-4) DATED DECEMBER 3. WAS RECEIVED ON ITEM NO. 5. WAS ACCEPTED ON OCTOBER 30. ITEM NO. 5 WAS AWARDED TO THE COMPANY ON CONTRACT NO. TRANSMITTED A COPY OF THE BID INVITATION WHICH WAS PURPORTEDLY USED AS ITS WORK SHEET. THE AMOUNT APPEARING OPPOSITE ITEM NO. 6 IS "$566.80. SINCE ONLY ONE OTHER BID WAS RECEIVED ON THE BOAT IN ITEM NO. 5. HE WAS NOT IMMEDIATELY MADE AWARE OF THE POSSIBILITY OF ANY ERROR IN THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY. SUBSEQUENT TO RECEIPT OF THE COMPANY'S NOTIFICATION OF BID ERROR NSC-SD BOAT SALES RECORDS WERE INTENSIVELY REVIEWED AND THE REVIEW DISCLOSED THAT THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY WAS "MORE IN LINE WITH BIDS RECEIVED ON LCVP'S WITH ENGINES.'.

B-141399, DEC. 22, 1959

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER (R11.2 L8) L8/NT4-4) DATED DECEMBER 3, 1959, WITH ENCLOSURES, FROM THE ACTING ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING A REQUEST OF THE AMERICAN MACHINERY AND EQUIPMENT COMPANY, FORT WORTH, TEXAS, FOR CANCELLATION OF THE AWARD TO IT OF ITEM NO. 5 ON SALE CONTRACT NO. N244S-57007, BECAUSE OF A MISTAKE IN ITS BID AS TO THAT ITEM ALLEGED BY THE BIDDER AFTER AWARD TO IT OF THE CONTRACT.

BY BID INVITATION NO. B-44-60-244, DATED OCTOBER 2, 1959, U.S. NAVAL SUPPLY DEPOT, SAN DIEGO, CALIFORNIA, SOLICITED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF NINE ITEMS OF SURPLUS PROPERTY CONSISTING OF "BOATS, WITH AND WITHOUT ENGINES, TYPE PRB, LCVP, LCPL, ICPR, WHALE AND WHERRY," LOCATED AT THE NAVAL DEPOT BOAT YARD, AND AS SPECIFICALLY DESCRIBED IN THE INVITATION UNDER EACH ITEM. IN RESPONSE TO THE INVITATION, AMERICAN MACHINERY AND EQUIPMENT COMPANY SUBMITTED BIDS ON SEVERAL ITEMS, INCLUDING A BID OF $566.80 ON ITEM NO. 5. ONLY ONE OTHER BID, IN THE AMOUNT OF $33.03, WAS RECEIVED ON ITEM NO. 5. THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY, BEING THE HIGHEST, WAS ACCEPTED ON OCTOBER 30, 1959, AND ITEM NO. 5 WAS AWARDED TO THE COMPANY ON CONTRACT NO. N244S-57007.

SUBSEQUENT TO THE AWARD, AMERICAN MACHINERY AND EQUIPMENT COMPANY BY LETTER DATED NOVEMBER 10, 1959, ADVISED THE NAVAL SUPPLY DEPOT THAT IT HAD INTENDED TO BID ON ITEM NO. 6 BUT THROUGH ERROR IT HAD PLACED ITS BID ON ITEM NO. 5, EXPLAINING THAT IT "NEVER BID ON BOAT HULLS WITHOUT ENGINES AS WE BUY FOR THE ENGINES ONLY.' THE COMPANY, IN SUPPORT OF ITS ALLEGATION OF ERROR, TRANSMITTED A COPY OF THE BID INVITATION WHICH WAS PURPORTEDLY USED AS ITS WORK SHEET, BEARING HANDWRITTEN AMOUNTS IN THE PRICE COLUMNS OPPOSITE ITEMS NOS. 3, 4, 6, 7, AND 8, BUT NONE OPPOSITE ITEM NO. 5. THE AMOUNT APPEARING OPPOSITE ITEM NO. 6 IS "$566.80," THE SAME AMOUNT APPEARING OPPOSITE ITEM NO. ON THE BID FORM SUBMITTED BY THE COMPANY TO THE DEPOT.

THE CONTRACTING OFFICER, IN HIS STATEMENT OF FACTS AND RECOMMENDATION, STATES THAT SINCE BIDS RECEIVED ON BOATS CAN REASONABLY VARY WIDELY AND, FURTHER, SINCE ONLY ONE OTHER BID WAS RECEIVED ON THE BOAT IN ITEM NO. 5, HE WAS NOT IMMEDIATELY MADE AWARE OF THE POSSIBILITY OF ANY ERROR IN THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY; HOWEVER, SUBSEQUENT TO RECEIPT OF THE COMPANY'S NOTIFICATION OF BID ERROR NSC-SD BOAT SALES RECORDS WERE INTENSIVELY REVIEWED AND THE REVIEW DISCLOSED THAT THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY WAS "MORE IN LINE WITH BIDS RECEIVED ON LCVP'S WITH ENGINES.' IT IS THE OPINION OF THE CONTRACTING OFFICER THAT AN ERROR IN BID COULD HAVE OCCURRED, AS ALLEGED BY THE COMPANY, AND THAT THROUGH ERROR THE BID WAS PLACED ON ITEM NO. 5 RATHER THAN ON ITEM NO. 6, AND IT IS HIS RECOMMENDATION THAT THE CONTRACTOR BE PERMITTED TO WITHDRAW ITS BID ON ITEM NO. 5 AND THE CONTRACT BE CANCELED AS TO THAT ITEM.

THE ESTABLISHED RULE IS THAT WHERE A BIDDER HAS MADE A MISTAKE IN THE SUBMISSION OF A BID AND THE BID HAS BEEN ACCEPTED, HE MUST BEAR THE CONSEQUENCES OF THE ERROR UNLESS THE MISTAKE WAS MUTUAL OR THE OFFICER ACCEPTING THE BID WAS ON NOTICE, EITHER ACTUAL OR CONSTRUCTIVE, OF SUCH CIRCUMSTANCES AS WOULD MAKE HIS ACCEPTANCE AN ACT OF BAD FAITH.

IT IS CLEAR FROM THE RECORD THAT THE ERROR, AS ALLEGED, WAS IN NO WAY CONTRIBUTED TO BY THE GOVERNMENT BUT WAS DUE SOLELY TO THE NEGLIGENCE OF THE BIDDER IN THE PREPARATION OF ITS BID. SUCH ERROR WAS UNILATERAL--- NOT MUTUAL--- AND WOULD NOT ENTITLE THE PURCHASER TO ANY RELIEF. SEE SALIGMAN, ET AL. V. UNITED STATES, 56 F.SUPP. 505, 507; AND OGDEN AND DOUGHERTY V. UNITED STATES, 102 C.CLS. 249, 259. THE QUESTION THEN FOR CONSIDERATION IS WHETHER THE ACCEPTANCE OF THE BID AS TO ITEM NO. 5 BY THE CONTRACTING OFFICER CONSUMMATED A VALID AND BINDING CONTRACT.

THE COMPANY'S BID WAS CLEAR AND UNAMBIGUOUS AND THERE WAS NOTHING THEREON TO INDICATE THAT ITS BID ON ITEM NO. 5 WAS NOT INTENDED FOR THAT ITEM. ALTHOUGH THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY ON ITEM NO. 5 WAS CONSIDERABLY HIGHER THAN THE ONLY OTHER BID RECEIVED ON THAT ITEM, IT DOES NOT APPEAR THAT THE DIFFERENCE WAS SO GREAT AS TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THE COMPANY'S BID. IN THIS CONNECTION, THE ACQUISITION COST OF THE PROPERTY DESCRIBED IN ITEM NO. 5 IS GIVEN AS $9,500. A BID OF $566.80 WOULD NOT SEEM UNREASONABLE TO ANYONE WITH AUTHORITY TO ACCEPT BIDS. FURTHERMORE, THIS WAS A SALE OF SURPLUS GOVERNMENT PROPERTY AND, IN VIEW OF THE WIDE RANGE OF PRICES ORDINARILY RECEIVED ON WASTE, SALVAGE, AND SURPLUS GOVERNMENT PROPERTY, A MERE DIFFERENCE IN THE PRICES 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 OR SUPPLIES TO BE FURNISHED TO THE GOVERNMENT. PRICES OFFERED TO THE GOVERNMENT FOR ITS SURPLUS PROPERTY ARE BASED MORE OR LESS UPON THE USE TO WHICH THE PROPERTY IS TO BE PUT BY THE PARTICULAR BIDDER OR UPON THE RISK OF RESALE THE BIDDER MIGHT WISH TO TAKE. SEE UNITED STATES V. SABIN METAL CORPORATION, 151 F.SUPP. 683, 689, CITING WITH APPROVAL 16 COMP. GEN. 596; 17 ID. 388; AND ID. 601. IN THE SABIN CASE, SUPRA, THE PRICE DISPARITY ON THE BIDS RECEIVED FOR THE SALE OF SURPLUS PROPERTY RANGED FROM A LOW OF $337.28 TO A HIGH OF $9,351.30.

THE COURT, AT PAGE 688, SAID:

"THIS BEING A SALE OF SURPLUS ENGINE PARTS, THE CONTRACTING OFFICER HAD NO METHOD OF KNOWING THAT THERE WAS AN ERROR IN THE DEFENDANT'S BID. THE GOVERNMENT WAS INTERESTED ONLY IN GETTING THE HIGHEST POSSIBLE PRICE FOR THE MATERIAL TO BE SOLD; IT WAS NOT IN THE METAL TRADE. THERE IS NO REASON WHY THE SPREAD IN BIDS SHOULD HAVE APPEARED PALPABLE TO THE GOVERNMENT. THE ADMINISTRATIVE AGENCY WAS NOT REQUIRED TO EMPLOY OR UTILIZE EXPERTS FOR THE BENEFIT OF THE DEFENDANT, NOR TO ASSUME THE BURDEN OF EXAMINING EVERY LOW BID FOR POSSIBLE ERROR BY THE BIDDER.'

IN VIEW OF THE FOREGOING AND AS NO ERROR WAS ALLEGED UNTIL AFTER AWARD AND THERE WAS NOTHING ON THE COMPANY'S BID TO PUT THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN ITS BID, IT MUST BE CONCLUDED THAT THE ACCEPTANCE OF THE BID OF AMERICAN MACHINERY AND EQUIPMENT COMPANY ON ITEM NO. 5 WAS MADE IN GOOD FAITH AND CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES.

ACCORDINGLY, THE BID MAY NOT BE WITHDRAWN AND THE AWARD OF ITEM NO. 5 TO AMERICAN MACHINERY AND EQUIPMENT COMPANY ON SALE CONTRACT NO. N244S-57007 MAY NOT BE CANCELED.