B-144173, OCT. 27, 1960

B-144173, OCT. 27, 1960

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 5, 1960 (C-610C/CT:JES NOBSR- 75244/4 SER: 13834), FROM THE DIRECTOR OF THE CONTRACTS DIVISION, BUREAU OF YARDS AND DOCKS, CONTRACTING OFFICER, TRANSMITTING A LETTER DATED AUGUST 5, 1960, ADDRESSED TO OUR OFFICE BY THE CONTINENTAL ELECTRONICS MANUFACTURING COMPANY, RELATING TO SUBCONTRACT NO. 75244/4, ENTERED INTO BETWEEN THAT COMPANY AND IDECO, INC., UNDER PRIME CONTRACT NO. NOBSR- 75244, A COST-PLUS-A-FIXED-FEE CONTRACT BETWEEN CONTINENTAL ELECTRONICS AND THE BUREAU OF SHIPS, DEPARTMENT OF THE NAVY, FOR CERTAIN WORK IN CONNECTION WITH A VERY LOW FREQUENCY COMMUNICATION FACILITY AT CUTLER, MAINE. THE PRIME CONTRACTOR REQUESTED AUTHORITY TO ADJUST UPWARD THE PRICE OF THE SUBCONTRACT BY THE AMOUNT OF $74,511 BECAUSE OF ALLEGED MUTUAL MISTAKE IN THE PROCUREMENT PROCESS AND THE RESULTING DOCUMENTS.

IT WAS REPORTED IN THE LETTER OF OCTOBER 5, 1960, THAT AFTER INVESTIGATION OF ALL THE FACTS AND CIRCUMSTANCES CONCERNING THIS MATTER, THE BUREAU OF YARDS AND DOCKS FOUND TWO MAJOR DEFECTS IN THE SUBCONTRACT DOCUMENTS IN THAT, FIRST, THE FULLY EXECUTED SUBCONTRACT DOCUMENTS ARE NOT ALL IDENTICAL, AND, SECOND, IN THOSE FULLY EXECUTED DOCUMENTS MOST FAVORABLE TO THE SUBCONTRACTOR--- IDECO, INC.--- THERE IS A PATENT AMBIGUITY IN THE TERMS CONCERNING THE CONTRACT PRICE. THE FACTS ARE DISCUSSED AT LENGTH IN THE LETTER OF OCTOBER 5, 1960,AND THE BUREAU OF YARDS AND DOCKS EXPRESSED THE OPINION THAT CLERICAL MISTAKES DID OCCUR IN THE BIDDING, AWARD, PREPARATION AND EXECUTION OF THE INDICATED SUBCONTRACT. ON THE BASIS OF RECORD, THE BUREAU RECOMMENDED THAT IT BE AUTHORIZED TO DIRECT THE CONTINENTAL ELECTRONICS MANUFACTURING COMPANY TO REDRAFT THE SUBJECT CONTRACT SO AS TO ELIMINATE ALL AMBIGUITIES AND TO EMBODY IN THE REVISED SUBCONTRACT A CONTRACT PRICE OF $1,164,277 FOR THE FURNISHING OF 42 HOISTS.

THE RECORD SHOWS THAT UNDER THE AUTHORITY OF CONTRACT NO. NOBSR 75244 THE CONTINENTAL ELECTRONICS MANUFACTURING COMPANY ISSUED BID SPECIFICATION NO. 75244/3 (CHANGED TO 75244/4 BY ADDENDUM NO. 2) TO A NUMBER OF PROSPECTIVE BIDDERS. ITEM 1 OF THE BID SPECIFICATION PROVIDED, AMONG OTHER THINGS, FOR THE FABRICATION, MANUFACTURE, ASSEMBLY AND TESTING OF ONE PROTOTYPE MODEL EACH, OF SINGLE DRUM AND DOUBLE DRUM HOISTS. ITEM 3 CALLED FOR THE DELIVERY OF 35 ADDITIONAL SINGLE DRUM HOISTS AND 5 ADDITIONAL DOUBLE DRUM HOISTS ASSEMBLED F.O.B. EAST MACHIAS, MAINE. SEVEN RESPONSIVE BIDS WERE RECEIVED, THE LOWEST BEING THAT SUBMITTED BY IDECO, INC., AT THE PRICE OF $74,511 FOR ITEM 1, AND AT THE PRICE OF $1,089,766 FOR ITEM 3. CONNECTION WITH ITS BID AS TO THE LATTER ITEM, IDECO, INC., MADE THE FOLLOWING STATEMENT:

"THE UNDERSIGNED BIDDER AGREES THAT THE PRICE CONTRACTOR SHALL HAVE AN OPTION FOR A PERIOD OF NINETY (90) CONSECUTIVE CALENDAR DAYS AFTER THE DATE OF ACCEPTANCE OF THIS PROPOSAL TO SUPPLEMENT THE CONTRACT TO INCLUDE THIRTY FIVE (35) ADDITIONAL SINGLE DRUM HOISTS AND FIVE (5) ADDITIONAL DOUBLE DRUM HOISTS AND TO INCREASE THE CONTRACT PRICE BY THE AMOUNT BID UNDER ITEM 3.'

AS SHOWING THE UNDERSTANDING OF THE PRIME CONTRACTOR CONCERNING THE IMPORT OF THE FOREGOING BID BY IDECO, INC., THE RECORD SHOWS THAT UNDER DATE OF SEPTEMBER 9, 1958, CONTINENTAL ELECTRONICS ADVISED THE OFFICER IN CHARGE OF CONSTRUCTION, DISTRICT PUBLIC WORKS OFFICE, FIRST NAVAL DISTRICT, IN PART, AS FOLLOWS:

"AFTER PROPER STUDY OF THE ABSTRACT OF BIDS AND THE TECHNICAL INFORMATION SUBMITTED AS PART OF THE BID PROPOSAL CEMCO RECOMMENDS THAT THE AWARD BE MADE TO IDECO, INC., IN THE TOTAL AMOUNT OF $1,164,277. WE HEREBY REQUEST YOUR APPROVAL TO MAKE THE AWARD BY ISSUING A LETTER OF AWARD IMMEDIATELY TO IDECO, INC., WHICH WILL BE FOLLOWED BY THE PROPERLY PREPARED AND EXECUTED NTRACT.'

THE ABSTRACT OF BIDS SHOWS THAT THE IDECO BID WAS ENTERED SO AS TO SHOW THE PRICE FOR ITEM 3 TO BE IN ADDITION TO THAT FOR ITEM 1, AS CLEARLY INTENDED BY THE BIDDER. IT IS ASSUMED THAT THE REQUESTED APPROVAL FOR AN AWARD ON THAT BASIS WAS GIVEN BY THE OFFICER IN CHARGE OF CONSTRUCTION.

HOWEVER, BY LETTER DATED SEPTEMBER 12, 1958--- THREE DAYS AFTER THE REQUESTED APPROVAL--- CONTINENTAL ELECTRONICS ADVISED IDECO, INC., IN PART, AS FOLLOWS:

"THIS LETTER CONSTITUTES AN AWARD TO IDECO, INC., COVERING ITEM 1 OF THE REFERENCED PROPOSAL IN THE AMOUNT OF $74,511.00.

"IN ACCORDANCE WITH "OPTION" INCLUDED IN YOUR PROPOSAL IT IS UNDERSTOOD THAT CONTINENTAL ELECTRONICS MANUFACTURING COMPANY SHALL HAVE AN OPTION FOR A PERIOD OF NINETY (90) DAYS FROM THE DATE OF THIS AWARD LETTER TO SUPPLEMENT THE AWARD (OR CONTRACT) TO INCLUDE THIRTY FIVE (35) ADDITIONAL SINGLE DRUM HOISTS AND FIVE (5) ADDITIONAL DOUBLE DRUM HOISTS AND TO INCREASE THE AWARD (OR CONTRACT) TO THE DOLLAR AMOUNT BID UNDER ITEM 3 OF THE PROPOSAL AS SUBMITTED AUGUST 22, 58.'

NOTWITHSTANDING ITS LETTER OF SEPTEMBER 9, CONTINENTAL ELECTRONICS ISSUED A PURCHASE ORDER TO IDECO, INC., ON OCTOBER 29, 1958, FOR THE FURNISHING OF 1 SINGLE DRUM PROTOTYPE HOIST AND 1 DOUBLE DRUM PROTOTYPE HOIST, PLUS 35 ADDITIONAL SINGLE DRUM HOISTS AND 5 ADDITIONAL DOUBLE DRUM HOISTS, ALL FOR THE PRICE OF $1,089,766. IN OTHER WORDS, THE PURCHASE ORDER CALLED FOR DELIVERY OF ALL OF THE EQUIPMENT COVERED BY ITEMS 1 AND 3 OF THE INVITATION AT THE PRICE QUOTED BY IDECO, INC., FOR ITEM 3 ALONE, DESPITE THE CONTRARY TERMS OF THE BID, AS SHOWN BY THE ABSTRACT.

THE RECORD INDICATES THAT IT WAS NOT UNTIL ON OR ABOUT JANUARY 23, 1959, THAT IDECO, INC., RECEIVED THE ORIGINAL PURCHASE ORDER DATED OCTOBER 29, 1958, AND FOR THE FIRST TIME BECAME AWARE OF THE ERROR. THEREAFTER, IDECO, INC., REQUESTED CONTINENTAL ELECTRONICS TO REVISE THE CONTRACT UPWARD BY THE AMOUNT OF $74,511 TO AGREE TO THE FORMER'S PROPOSAL OF AUGUST 19, 1958.

IT IS AN ELEMENTARY PRINCIPLE OF CONTRACT LAW THAT ACCEPTANCE OF AN OFFER MUST BE UNEQUIVOCAL AND UNQUALIFIED IN ORDER TO BIND THE OFFERER AND RESULT IN A VALID CONTRACT. IT HAS BEEN HELD IN NUMEROUS CASES THAT, TO MAKE A VALID CONTRACT, THE MINDS OF THE PARTIES MUST MEET ON THE SAME TERMS AND IN THE SAME SENSE. SEE ROTHSTEIN V. EDWARDS, 94 F.2D 488; NOLAN BROTHERS, INC. V. CENTURY SPRINKLER CORPORATION, 220 F.2D 726; AND PEERLESS CASUALTY COMPANY V. HOUSING AUTHORITY, 228 F.2D 376. IN THE CASE OF CARR V. DUVAL, ET AL., 14 PET 77, 82, MR. JUSTICE CATRON SAID:

"* * * THE RULE LAID DOWN BY THIS COURT IN ELIASON VS. HENSHAW, 4 WHEAT. 228, IS, THAT AN OFFER OF A BARGAIN BY ONE PERSON TO ANOTHER, IMPOSES NO OBLIGATION UPON THE FORMER, UNLESS IT IS ACCEPTED BY THE LATTER, ACCORDING TO THE TERMS IN WHICH THE OFFER IS MADE; AND THAT ANY QUALIFICATIONS OF, OR DEPARTURE FROM THE TERMS, INVALIDATES THE OFFER, UNLESS THE SAME BE AGREED TO BY THE PERSON WHO MADE IT. * * *"

IT IS OUR VIEW THAT THE AWARD OF SEPTEMBER 12, 1958, CONSTITUTED A VALID CONTRACT BINDING ON THE PARTIES AS TO ITEM 1, BUT THAT THE PURCHASE ORDER ISSUED TO IDECO, INC., ON OCTOBER 29, 1959, WAS ERRONEOUS AND UNAUTHORIZED FOR TWO REASONS. FIRST, IT INCLUDED ITEM 1 OF THE BID FOR WHICH AN AWARD HAD ALREADY BEEN MADE IN THE AMOUNT OF $74,511, AND, SECOND, THE PURCHASE ORDER WAS NOT RESPONSIVE TO IDECO'S BID. IN VIEW OF THE HOLDINGS IN THE CASES CITED ABOVE WE CONCLUDE THAT THE PURCHASE ORDER WAS NOT BINDING ON THE SUBCONTRACTOR, AND, IN VIEW OF THE DISCREPANCIES BETWEEN THE PURPORTED DUPLICATE ORIGINALS HELD BY THE RESPECTIVE PARTIES, WE DO NOT FEEL THAT IDECO CAN BE HELD TO HAVE VOLUNTARILY ACCEPTED THE ORDER AT THE ERRONEOUS PRICE. IT IS OUR VIEW THAT IDECO IS ENTITLED TO BE PAID AT ITS BID PRICE OF $74,511 FOR ITEM 1, AND $1,089,766 FOR THE ADDITIONAL UNITS INCLUDED IN ITEM 3. CONTINENTAL ELECTRONICS SHOULD THEREFORE BE ADVISED TO ADJUST THE CONTRACT PRICE AS HEREIN INDICATED.