B-144320, NOV. 15, 1960

B-144320, NOV. 15, 1960

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER (R11.2) DATED OCTOBER 24, 1960, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING A MISTAKE IN BID ALLEGED BY MADISON TOOL AND SUPPLY COMPANY, ELIZABETH, NEW JERSEY, AFTER AWARD TO IT OF SALES CONTRACT NO. N407S-11376.

BY SALES INVITATION NO. B-9-61-407 DATED AUGUST 9, 1960, THE U.S. NAVAL SUPPLY DEPOT, MECHANICSBURG, PENNSYLVANIA, SOLICITED SEALED BIDS -- OPENING DATE AUGUST 30, 1960--- FOR THE PURCHASE FROM THE GOVERNMENT OF A NUMBER OF ITEMS OF SURPLUS PROPERTY, CONSISTING OF "INDUSTRIAL MACHINERY: GRINDING MACHINE, LATHES, SCREW MACHINE, PRESSES, DRILLING MACHINE, BORING MACHINE, ETC., " LOCATED AT U.S. NAVY MACHINE TOOL BRANCH, SCOTIA, NEW YORK. IN RESPONSE TO THE INVITATION, MADISON TOOL AND SUPPLY COMPANY SUBMITTED A BID QUOTING PRICES ON THREE OF THE ADVERTISED ITEMS, INCLUDING ITEM NO. 177 AT $5,201.99 FOR ONE "ELECTRIC FURNACE.' THE REQUIRED DEPOSIT IN THE AMOUNT OF $2,250 WAS FORWARDED WITH THE COMPANY'S BID. FOUR OTHER BIDS, RANGING FROM $753 TO $106.96, WERE RECEIVED ON ITEM NO. 177. THE MADISON TOOL AND SUPPLY COMPANY'S BID ON THAT ITEM, BEING THE HIGHEST, WAS ACCEPTED ON SEPTEMBER 1, 1960, AND ITEM NO. 177, TOGETHER WITH ITEM NO. 59, WAS AWARDED TO THE COMPANY ON CONTRACT NO. N407S-11376.

SUBSEQUENT TO RECEIPT OF THE CONTRACT THE CONTRACTOR, IN LETTER DATED SEPTEMBER 9, 1960, ADVISED THE NAVAL SUPPLY DEPOT DISPOSAL OFFICER THAT IT HAD MADE AN ERROR IN ITS BID IN THAT IT HAD PLACED THE BID QUOTATION INTENDED FOR ITEM NO. 178 ON ITEM NO. 177. THE CONTRACTOR PETITIONED FOR RELIEF FROM ITS OBLIGATIONS IN ACCEPTING ITEM NO. 177. IN REPLY THE DISPOSAL OFFICER, IN LETTER DATED SEPTEMBER 23, 1960, ADVISED MADISON TOOL AND SUPPLY COMPANY THAT THE ACTIVITY COULD NOT RESCIND THE CONTRACT NOR AUTHORIZE RELIEF ON ITEM NO. 177, BUT ADVISED THE COMPANY OF THE PROCEDURE TO BE TAKEN IF IT DESIRED TO APPEAL THE DECISION AND, ALSO, INVITED THE COMPANY'S ATTENTION TO PARAGRAPH 18 OF THE TERMS AND CONDITIONS OF THE SALE WHEREBY IT COULD ELECT TO BE HELD IN DEFAULT AS TO ITEM NO. 177 OF THE CONTRACT BY PAYING 20 PERCENT OF THE BID PRICE OF THE ITEM IN QUESTION AS LIQUIDATED DAMAGES. BY LETTER DATED SEPTEMBER 27, 1960, THE CONTRACTOR APPEALED FROM THE DECISION OF THE DISPOSAL OFFICER, STATING THAT A 20 PERCENT DEFAULT CHARGE OF $1,040.40 WOULD RESULT IN A CRITICAL LOSS TO IT AS A SMALL FIRM OF LIMITED CAPITAL, AND THAT ITS COMMISSION OF $285 ON ITEM NO. 59 WOULD HARDLY ALLOW IT TO ABSORB THE LOSS WHICH IT WOULD FACE IN ACCEPTING ITEM NO. 177. IN SUPPORT OF ITS ALLEGATION OF ERROR AND REQUEST TO BE RELIEVED FROM ITS OBLIGATIONS ON ITEM NO. 177 THE CONTRACTOR FORWARDED A COPY OF ITS CUSTOMER'S PURCHASE ORDER NO. 7837 DATED AUGUST 18, 1960, AUTHORIZING IT TO PURCHASE FOR THE CUSTOMER'S ACCOUNT, ON A 7 1/2 PERCENT COMMISSION BASIS, THREE OF THE SALE ITEMS ON INVITATION NO. B- 9-61-407, ITEM NO. 59 AT $3,799.99, ITEM NO. 178 AT $5,201.99, AND ITEM NO. 244 AT $1,903; ALSO, A COPY OF THE CONTRACTOR'S INVOICE DATED SEPTEMBER 6, 1960, COVERING ITEM NO. 59 AT THE PURCHASE PRICE OF $3,799.99 PLUS 7 1/2 PERCENT COMMISSION OF $285.

THE CONTRACTING OFFICER IN HIS STATEMENT CONCERNING THE SALE TRANSACTION STATED THAT IN VIEW OF THE EVIDENCE SUBMITTED BY THE BIDDER AND UPON AN EVALUATION OF OTHER BIDS RECEIVED FOR ITEM NO. 177 AS COMPARED WITH THOSE RECEIVED FOR ITEM NO. 178, IT IS HIS BELIEF THAT CLAIMANT'S BID OF $5,201.99 IS MORE IN LINE WITH BIDS RECEIVED FOR ITEM NO. 178, THE HIGH BID ON THAT ITEM BEING $6,101.01 AND THE SECOND HIGH BID $5,777.77. ALSO STATED THAT IT IS HIS OPINION THAT THE COMPANY MADE A MISTAKE IN ITS BID, AS ALLEGED; HOWEVER, THE OWNER OF THE COMPANY WAS PRESENT AT THE PUBLIC READING OF THE BIDS AND DID NOT INDICATE AT THAT TIME THAT HE RECOGNIZED AN ERROR IN HIS COMPANY'S BID. THE CONTRACTING OFFICER, THEREFORE, MADE NO RECOMMENDATION RESPECTING THE PURCHASER'S REQUEST FOR RELIEF.

WHILE IT MAY BE THAT MADISON TOOL AND SUPPLY COMPANY MAY HAVE MADE AN ERROR IN SUBMITTING ITS BID ON ITEM NO. 177, AS ALLEGED, IT IS CLEAR FROM THE RECORD THAT SUCH ERROR WAS IN NO WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT BUT WAS DUE SOLELY TO THE COMPANY'S OWN NEGLIGENCE IN THE PREPARATION OF ITS BID. THE ERROR, THEREFORE, WAS UNILATERAL--- NOT MUTUAL--- AND WOULD NOT ENTITLE THE PURCHASER TO ANY RELIEF UNLESS THE CIRCUMSTANCES WERE SUCH THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER WAS CHARGEABLE WITH NOTICE, EITHER ACTUAL OR CONSTRUCTIVE, OF SUCH ERROR SO AS TO MAKE HIS ACCEPTANCE AN ACT OF BAD FAITH.

THIS WAS A SALE OF SURPLUS GOVERNMENT PROPERTY AND, SINCE A WIDE RANGE IN THE PRICES BID FOR SUCH PROPERTY IS USUAL AS BIDDERS GENERALLY CAN BE EXPECTED TO PLACE DIFFERENT VALUES ON SUCH MATERIALS DEPENDING ON THEIR INDIVIDUAL NEEDS OR THEIR CHANCES OF RESALE, A MERE DIFFERENCE IN THE AMOUNT OF THE BIDS WOULD NOT NECESSARILY PLACE THE CONTRACTING OFFICER OF NOTICE OF AN ERROR AS WOULD A LIKE DIFFERENCE IN THE PRICES QUOTED ON NEW EQUIPMENT, SUPPLIES, ETC., TO BE FURNISHED THE GOVERNMENT. 28 COMP. GEN. 550, 551. SEE, ALSO, UNITED STATES V. SABIN METAL CORP., 151 F.SUPP. 683. NEITHER DOES IT APPEAR THAT A BID OF $5,201.99 WHEN COMPARED WITH THE ESTIMATED ACQUISITION COST OF $31,857.16 FOR SUCH PROPERTY, WHICH WAS DESCRIBED AS "USED AND GOOD," WOULD BE CONSIDERED UNREASONABLE TO ANYONE WITH AUTHORITY TO ACCEPT BIDS. THE BID OF MADISON TOOL AND SUPPLY COMPANY WAS REGULAR ON ITS FACE AND THE RECORD DOES NOT INDICATE ANY CIRCUMSTANCES WHICH SHOULD HAVE MADE THE CONTRACTING OFFICER AWARE OF THE PROBABILITY OF AN ERROR IN THE BID, ESPECIALLY SINCE THE PURCHASER WHO WAS PRESENT AT THE PUBLIC OPENING OF BIDS DID NOT APPEAR TO RECOGNIZE ANY ERROR IN HIS COMPANY'S BID.

FOR THESE REASONS AND SINCE ERROR WAS NOT ALLEGED BY THE BIDDER UNTIL AFTER AWARD OF ITEM NO. 177, IT MUST BE HELD THAT THE CONTRACTING OFFICER WAS WITHOUT ACTUAL OR CONSTRUCTIVE NOTICE OF ANY ERROR AND HIS ACCEPTANCE OF THE BID OF MADISON TOOL AND SUPPLY COMPANY WAS MADE IN GOOD FAITH. SUCH ACCEPTANCE RESULTED IN A VALID AND BINDING CONTRACT AND VESTED IN THE GOVERNMENT RIGHTS WHICH NO OFFICER OR AGENT OF THE GOVERNMENT IS AUTHORIZED TO WAIVE OR RELEASE. SEE UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313; AND AMERICAN SMELTING AND REFINING COMPANY V. UNITED STATES, 259 U.S. 75.

ACCORDINGLY, THERE IS NO LEGAL BASIS FOR GRANTING ANY RELIEF TO MADISON TOOL AND SUPPLY COMPANY AS TO ITEM NO. 177 ON SALES CONTRACT NO. N407S- 11376.