B-143516, JUL. 29, 1960

B-143516: Jul 29, 1960

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BIDDERS WERE INVITED TO INSPECT THE MATERIALS OFFERED FOR SALE AND THEY WERE INSTRUCTED TO SUBMIT THEIR BIDS ON A SEPARATE BID CARD (12ND NSC 487) FOR EACH ITEM ON WHICH THEY DESIRED TO BID. IT WAS FOUND THAT THE HIGH BID OF $1.888 EACH FOR 469 STEEL PIPE FLANGES. WHICH IS LISTED AS HAVING AN ACQUISITION COST OF $773.85 AND IS DESCRIBED AS BEING "APPARENTLY UNUSED. " WAS SUBMITTED BY MAYCO SALVAGE CO. AWARD WAS MADE TO MAYCO FOR ITEM 71 UNDER CONTRACT NO. MAYCO ALLEGES THAT IT ERRONEOUSLY BID ON ITEM 71 AS A BRASS FLANGE INSTEAD OF AS A STEEL FLANGE AND THAT A PROPER SCRAP BID SHOULD HAVE BEEN APPROXIMATELY 10 TO 11 CENTS. THE ABSTRACT OF BIDS SHOWS THAT BIDS OF ?1151 EACH AND ?28 EACH WERE RECEIVED ON ITEM 71 IN ADDITION TO MAYCO'S BID OF $1.888.

B-143516, JUL. 29, 1960

TO THE SECRETARY OF THE NAVY:

WE REFER TO A LETTER DATED JULY 14, 1960 (REFERENCE R11.2), WITH ENCLOSURES, FROM YOUR ACTING ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REQUESTING A DECISION AS TO WHETHER RELIEF MAY PROPERLY BE GIVEN IN THE MATTER OF A MISTAKE IN BID ALLEGED AFTER AWARD OF SALES CONTRACT NO. N228S-45070 (SPOT BID NO. 2-60-228) TO MAYCO SALVAGE CO., INC., SAN FRANCISCO, CALIFORNIA, BY U.S. NAVAL SUPPLY CENTER, OAKLAND, CALIFORNIA.

THE NAVAL SUPPLY CENTER, OAKLAND, CALIFORNIA, ISSUED AN ANNOUNCEMENT OF A "SPOT BID" SALE OF SOME 223 ITEMS OF MATERIAL. BIDDERS WERE INVITED TO INSPECT THE MATERIALS OFFERED FOR SALE AND THEY WERE INSTRUCTED TO SUBMIT THEIR BIDS ON A SEPARATE BID CARD (12ND NSC 487) FOR EACH ITEM ON WHICH THEY DESIRED TO BID. THE CARD, AS FILLED OUT, SHOWS THE ITEM NUMBER, UNIT PRICE BID AND THE BIDDER'S NAME AND ADDRESS. THE INVITATION ADVISED THAT BIDS COULD BE SUBMITTED IN ADVANCE OF THE DATE OF SALE OR BY DEPOSIT DIRECTLY INTO THE BID BOX AT THE PLACE OF BID OPENING ANY TIME PRIOR TO BID CLOSING. THE SALE PROCEDURE AS DESCRIBED IN THE INVITATION PROVIDED THAT ON THE SALE DATE, MAY 13, 1960, EACH ITEM OFFERED WOULD BE ANNOUNCED AND TIME WOULD BE ALLOWED FOR CONSIDERATION AND PREPARATION OF BID CARDS PRIOR TO BID CLOSING ON THE ITEM. AFTER CLOSING, THE HIGH BID WOULD BE SELECTED AND ANNOUNCED TOGETHER WITH THE NAME OF THE SUCCESSFUL BIDDER.

UPON BID OPENING ON MAY 13, 1960, IT WAS FOUND THAT THE HIGH BID OF $1.888 EACH FOR 469 STEEL PIPE FLANGES, ITEM 71 OF THE INVITATION, WHICH IS LISTED AS HAVING AN ACQUISITION COST OF $773.85 AND IS DESCRIBED AS BEING "APPARENTLY UNUSED--- IN GOOD CONDITION," WAS SUBMITTED BY MAYCO SALVAGE CO., INC. AWARD WAS MADE TO MAYCO FOR ITEM 71 UNDER CONTRACT NO. N228S-45070.

BY LETTER DATED MAY 13, 1960, TO THE SALES CONTRACTING OFFICER, MAYCO ALLEGES THAT IT ERRONEOUSLY BID ON ITEM 71 AS A BRASS FLANGE INSTEAD OF AS A STEEL FLANGE AND THAT A PROPER SCRAP BID SHOULD HAVE BEEN APPROXIMATELY 10 TO 11 CENTS.

THE ABSTRACT OF BIDS SHOWS THAT BIDS OF ?1151 EACH AND ?28 EACH WERE RECEIVED ON ITEM 71 IN ADDITION TO MAYCO'S BID OF $1.888.

THE CONTRACTING OFFICER REPORTS THAT THE ACQUISITION COST FOR EACH STEEL FLANGE OFFERED FOR SALE IS $1.65 BUT THAT THE THEN CURRENT MARKET VALUE OF STEEL SCRAP, WHICH IS COMMONLY UNDERSTOOD TO BE THE ONLY PURPOSE FOR WHICH THIS ITEM IS BOUGHT, IS $0.015 PER POUND AND EACH STEEL FLANGE WEIGHS 14 POUNDS. HE FURTHER REPORTS THAT ON SPOT BID SALES, BIDS ARE COLLECTED, REVIEWED IMMEDIATELY AND THE HIGH BIDDER ANNOUNCED ON THE SPOT, CONSEQUENTLY, NO OPPORTUNITY EXISTS FOR THE CONTRACTING OFFICER TO ANALYZE BIDS PRIOR TO AWARD SO AS TO KNOW WHETHER OR NOT A BIDDER'S PRICE IS OUT- OF-LINE WITH THOSE OF OTHER BIDDERS. HE STATES THAT UNLESS THE PRICE OF A BID IS SO GROSSLY ERRONEOUS AS TO MAKE IT OBVIOUS FROM THE BID ITSELF THAT A MISTAKE HAS BEEN MADE, THE CONTRACTING OFFICER COULD NOT BE EXPECTED TO NOTICE AN OUT-OF-LINE BID PRICE. THE CONTRACTING OFFICER CONCLUDES THAT SINCE THE MAYCO BID IS NOT ONLY 6.74 TIMES HIGHER THAN THE NEXT HIGH BID BUT 1.14 TIMES HIGHER THAN THE ACQUISITION COST PAID BY THE NAVY, THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF A POSSIBLE ERROR IN THE SUBMITTED BID.

WE ARE INFORMED BY THE ADMINISTRATIVE OFFICE THAT PAYMENT FOR AND REMOVAL OF THE MATERIAL INVOLVED BY THE HIGH BIDDER HAS BEEN WITHHELD PENDING OUR CONSIDERATION OF THE MATTER.

ON ITS FACE TH MAYCO BID IS UNUSUALLY HIGH SINCE THE BID PRICE EXCEEDS THE ACQUISITION COST OF THE ITEM OFFERED IN A SITUATION WHERE THE ITEM IS REPORTED TO HAVE COMMERCIAL USE ONLY AS SCRAP AT A VALUE CONSIDERABLY LESS THAN THE ORIGINAL COST OF ACQUISITION. IN THESE CIRCUMSTANCES WE BELIEVE THAT THE HIGH BIDDER SHOULD BE RELIEVED FROM THE CONSEQUENCES OF HIS APPARENT ERROR.

ACCORDINGLY, MAYCO SALVAGE CO., INC., MAY BE RELIEVED FROM ITS OBLIGATIONS UNDER CONTRACT NO. N228S-45070 AND THE AWARD AS MADE MAY BE CANCELLED.