B-142734, JUN. 6, 1960

B-142734, JUN. 6, 1960

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED APRIL 27, 1960, WITH ENCLOSURES, FROM THE CHIEF, CONTRACTS BRANCH, PROCUREMENT DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, IN WHICH A DECISION IS REQUESTED CONCERNING A MISTAKE IN BID ALLEGED BY THE UTICA DIVISION, BENDIX AVIATION CORPORATION, UTICA, NEW YORK, AFTER AWARD OF CONTRACT NO. O.1. 12956E-59, DATED JANUARY 24, 1959, BASED ON THE ERRONEOUS BID.

UNDER DATE OF DECEMBER 5, 1958, U.S. ARMY TRANSPORTATION SUPPLY AND MAINTENANCE COMMAND (DIR.PROC. AND PDN.--- TCSMC-PEP), ST. LOUIS, MISSOURI, BY REQUEST FOR PROPOSALS NOS. RPA 332-59E AND RPA 355-59E, SOLICITED PRICES ON A PER EACH BASIS FOR FURNISHING A CERTAIN NUMBER OF UNITS UNDER EACH OF THE TWO ITEMS OF SUPPLIES LISTED ON PAGE 1 OF THE CONTINUATION SHEET OF THE REQUEST FOR PROPOSALS. ITEM NO. 1, UNDER RPA 332-59E/E34-378-S), CALLED FOR FURNISHING 1,000 UNITS OF ,4213 36325 PINION ASSY, PLANETARY FOR L-20A ACFT. (FIA 114).' THE UTICA DIVISION, BENDIX AVIATION CORPORATION, SUBMITTED A PROPOSAL DATED DECEMBER 26, 1958, WHEREIN IT QUOTED A UNIT PRICE OF $6.23 F.O.B. UTICA, NEW YORK, POINT OF SHIPMENT, AND A TOTAL BID PRICE OF $6,230 FOR ITEM NO. 1. THE CORPORATION'S PROPOSAL WAS ACCEPTED BY THE CONTRACTING OFFICER ON JANUARY 24, 1959, AND CONTRACT NO. O.I. 12956E 59, WITH PROVISION THAT DELIVERY WAS TO BE ON OR BEFORE MAY 29, 1959, WAS AWARDED TO IT.

ON OCTOBER 2, 1959, OR SOME FOUR MONTHS AFTER THE DATE OF AWARD OF THE CONTRACT AND BEFORE ANY DELIVERIES HAD BEEN MADE, THE CONTRACTOR TELEPHONED THE CONTRACTING OFFICER AND ALLEGED A MISTAKE IN ITS BID PRICE. AT THAT TIME THE CONTRACTOR WAS ADVISED TO SUBMIT IN WRITING A REQUEST TO MODIFY ITS PROPOSAL, TOGETHER WITH A STATEMENT AND SUPPORTING EVIDENCE OF THE EXISTENCE OF THE MISTAKE AND THE MANNER IN WHICH IT OCCURRED, AS WELL AS A COST BREAKDOWN OF THE PRICE WHICH ALLEGEDLY SHOULD HAVE BEEN IN EFFECT AT THE TIME THE CONTRACT WAS NEGOTIATED.

THEREAFTER, IN LETTER DATED OCTOBER 5, 1959, THE CONTRACTOR REQUESTED THAT THE CONTRACT BE MODIFIED TO INCREASE THE UNIT PRICE FROM $6.23 TO $14, GIVING THE FOLLOWING REASONS IN SUBSTANTIATION OF THE REQUESTED INCREASE:

"1. THE PRICE OF $12.45 EACH APPEARING IN OUR SERVICE PARTS PRICE LIST WAS IN ERROR IN AS MUCH AS IT REFLECTED A NET PRICE IN LIEU OF A LIST PRICE. THE CORRECT LIST PRICE OF $28.00 SHOULD HAVE BEEN THE ONE APPEARING IN OUR PRICE BOOK.

"2. AT THE TIME THE SUBJECT CONTRACT WAS RECEIVED, THE NET PRICE OF $12.45 WAS PICKED UP AS A LIST PRICE, AND THEN A FIFTY (50 PERCENT) PERCENT DISCOUNT WAS APPLIED (THIS WAS THE NORMAL DISCOUNT ALLOWED YOUR COMMAND AT THE TIME THIS ORDER WAS ISSUED) RESULTING IN A UNIT PRICE OF $6.23 EACH. ACTUALLY THE ORDER SHOULD HAVE BEEN HONORED AT A LIST PRICE OF $28.00 EACH AND THEN SUBJECT TO A DISCOUNT OF FIFTY (50 PERCENT) PERCENT WHICH WOULD HAVE MADE THE UNIT NET PRICE FOURTEEN ($14.00) DOLLARS.

"3. AS POINTED OUT IN OUR RECENT TELEPHONE CONVERSATION, FURTHER COMPLICATIONS HAVE DEVELOPED SINCE THE ACCEPTANCE OF THIS ORDER. THE PRICE OF $28.00 HAD BEEN BASED ON PART NUMBER 36325 BEING MANUFACTURED BY A SUB-CONTRACTOR. THIS VENDOR IS NO LONGER AVAILABLE AS A SOURCE OF SUPPLY FOR THIS PART. IN ORDER TO FULFILL YOUR CONTRACTUAL REQUIREMENTS FOR ONE THOUSAND (1,000) PIECES WE DECIDED TO MANUFACTURE THIS PART IN OUR OWN PLANT. IN THE PROCESS OF SETTING UP THIS PART IT WAS DISCOVERED THAT ALL THE TOOLING NECESSARY FOR ITS COMPLETE FABRICATION WAS NO LONGER AVAILABLE. THE ACQUISITION OF TOOLING, PLUS A CHANGE IN LABOR STANDARDS HAS RESULTED IN ADDITIONAL COSTS TO THIS CONTRACTOR.

"4. ON SEPTEMBER 11, 1959, THIS WRITER ISSUED A SUPPLEMENTAL LETTER INCREASING THE PRICE ON A NUMBER OF ITEMS THAT ARE CONTAINED IN OUR ORIGINAL PRICE LIST. THIS LETTER CORRECTED AND INCREASED THE LIST PRICE OF PART NUMBER 36325 FROM $12.45 TO $32.95. IF THIS PART WERE TO BE PROCURED AT THE PRESENT TIME THE PRICE TO YOUR COMMAND WOULD BE $32.95 LESS FIFTY FIVE (55 PERCENT) PERCENT (DISCOUNT EFFECTIVE JULY 1, 1959) OR A NET PRICE OF $14.83 EACH.

"5. ALTHOUGH WE ARE EXPERIENCING THIS INCREASED COST IN THE MANUFACTURING OF THESE ONE THOUSAND (1,000) PIECES, WE ARE REQUESTING THAT THE CONTRACT REFLECT A PRICE INCREASE TO ONLY FOURTEEN ($14.00) DOLLARS. THIS BEING THE ACTUAL UNIT NET PRICE AT THE TIME YOUR ORDER WAS ACCEPTED.'

IT ALSO FURNISHED A COPY OF ITS "COST BREAKDOWN" FOR THE PART. IN LETTER DATED NOVEMBER 24, 1959, THE CONTRACTOR STATED THAT IT WAS WILLING TO OFFER A REDUCTION IN THE PRICE BY ELIMINATING THREE ITEMS OF COST WHICH WOULD RESULT IN A FINAL UNIT PRICE OF $11.12 EACH (INCLUDING $0.10 PACKAGING), AND IN A TELEGRAM DATED MARCH 3, 1960, IT ADVISED THE PROCURING AGENCY TO REMOVE THE SPECIAL PACKAGING CHARGE FROM ITS REQUESTED PRICE, MAKING IT $11.02.

THE CONTRACTOR'S PROPOSAL IS FOR MODIFICATION OF THE CONTRACT BY INCREASING THE UNIT PRICE FROM $6.23 TO $11.02, THEREBY INCREASING THE TOTAL AMOUNT OF THE CONTRACT FROM $6,230 TO $11,020, AN INCREASE OF $4,790.

THE BASIC QUESTION FOR CONSIDERATION HERE IS NOT WHETHER THE UTICA DIVISION, BENDIX AVIATION CORPORATION, MADE AN ERROR IN ITS BID, AS ALLEGED, BUT WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY THE ACCEPTANCE OF THE BID. IT IS A WELL-ESTABLISHED RULE THAT THE ACCEPTANCE OF A BID CONSUMMATES A VALID AND BINDING CONTRACT UNLESS THE OFFICER ACCEPTING IT WAS ON NOTICE, EITHER ACTUAL OR CONSTRUCTIVE, OF SUCH CIRCUMSTANCES AS WOULD MAKE HIS ACCEPTANCE AN ACT OF BAD FAITH.

THE CONTRACTING OFFICER, IN HIS STATEMENT AS TO THE CONTRACT TRANSACTIONS, STATES THAT THE BID OF THE CORPORATION WAS REGULAR ON ITS FACE; THAT THE ITEM OFFERED UNDER ITS BID WAS LISTED IN THE UTICA DIVISION, BENDIX AVIATION CORPORATION PARTS PRICE LIST EFFECTIVE MAY 15, 1958, AN ESTABLISHED COMMERCIAL PRICE LIST IN EFFECT AT THE TIME THE PROPOSAL WAS ACCEPTED; AND THAT NO OTHER BIDS WERE AVAILABLE FOR COMPARISON WITH THE CORPORATION'S BID, EXCEPT THE ONLY PREVIOUS PROCUREMENT OF THIS ITEM AT $3.45 EACH FOR EIGHT UNITS OF SURPLUS PROPERTY, INASMUCH AS THE ITEM IN QUESTION IS A PROPRIETARY ITEM OF THE BENDIX AVIATION CORPORATION. THE CONTRACTING OFFICER STATES ALSO THAT FOR THESE REASONS AND SINCE THE CONTRACTOR DID NOT ALLEGE ERROR IN ITS BID UNTIL AFTER AWARD OF THE CONTRACT, HE WAS NOT ON ACTUAL OR CONSTRUCTIVE NOTICE OF ANY ERROR IN THE CONTRACTOR'S PROPOSAL AT THE TIME OF HIS ACCEPTANCE OF THE BID.

WE AGREE, UNDER THESE CIRCUMSTANCES, THAT THE CONTRACTING OFFICER AT THE TIME OF HIS ACCEPTANCE OF THE CORPORATION'S BID WAS WITHOUT ACTUAL OR CONSTRUCTIVE NOTICE OF ANY ERROR IN THE BID, AND THAT HIS ACCEPTANCE OF THE BID WAS IN GOOD FAITH. SUCH ACCEPTANCE RESULTED IN A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO AND VESTED IN THE GOVERNMENT RIGHTS WHICH NO OFFICER OR AGENT OF THE GOVERNMENT MAY WAIVE OR GIVE AWAY. SEE 36 COMP. GEN. 27, 30, AND COURT CASES CITED THEREIN.

WITH RESPECT TO THE CONTRACTOR'S ALLEGATION THAT CHANGED CIRCUMSTANCES CAUSED AN INCREASE IN THE COST OF MANUFACTURING THE ITEM, IT IS A FUNDAMENTAL RULE THAT VALID CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN, AND THE FACT THAT, AS HERE, UNFORESEEN DIFFICULTIES OR CHANGED CONDITIONS ARE ENCOUNTERED WHICH RENDER PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE THAN CONTEMPLATED, OR EVEN OCCASION A PECUNIARY LOSS, WILL NEITHER EXCUSE A PARTY FROM THE PERFORMANCE OF AN ABSOLUTE UNDERTAKING TO DO A THING THAT IS POSSIBLE AND LAWFUL, NOR ENTITLE HIM TO ADDITIONAL COMPENSATION, UNLESS SPECIFICALLY PROVIDED IN THE CONTRACT. SEE 30 COMP. GEN. 264, 265, AND COURT CASES CITED THEREIN.

IN VIEW OF THE FOREGOING, THERE IS NO LEGAL BASIS FOR GRANTING ANY INCREASE IN THE PRICE STIPULATED IN CONTRACT NO. O.I. 12956E-59.

ONE SET OF THE DOCUMENTS FORWARDED WITH THE LETTER OF APRIL 27, 1960, IS RETAINED.