B-144331, NOV. 18, 1960

B-144331, NOV. 18, 1960

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER (R11.2) DATED OCTOBER 25, 1960, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REQUESTING A DECISION AS TO WHETHER SALE CONTRACT NO. N407S- 11457 AWARDED TO THE CAPITAL INVESTMENT CO., BERKLEY, MICHIGAN, MAY BE CANCELED BECAUSE OF AN ERROR, ALLEGED AFTER AWARD, IN THE COMPANY'S BID ON WHICH THE CONTRACT WAS BASED.

BY INVITATION NO. B-10-61-407, DATED AUGUST 25, 1960, THE U.S. NAVAL SUPPLY DEPOT, MECHANICSBURG, PENNSYLVANIA, ADVERTISED FOR BIDS--- OPENING DATE SEPTEMBER 15, 1960--- FOR THE PURCHASE FROM THE GOVERNMENT OF A NUMBER OF ITEMS OF SURPLUS PROPERTY DESCRIBED AS "INDUSTRIAL MACHINERY," LOCATED AT U.S. NAVY MACHINE TOOL BRANCH, SCOTIA, NEW YORK. IN RESPONSE TO THE INVITATION CAPITAL INVESTMENT CO. SUBMITTED A BID WITH QUOTATIONS ON SEVERAL OF THE ADVERTISED ITEMS, INCLUDING A PRICE OF $1,501 FOR ITEM NO. 151, CONSISTING OF ONE PRESS WHICH WAS DESCRIBED IN DETAIL IN THE INVITATION, THE ESTIMATED ACQUISITION COST BEING GIVEN AS $1,200. ONE OTHER BID IN THE AMOUNT OF $261.77 WAS RECEIVED ON ITEM NO. 151. THE BID OF CAPITAL INVESTMENT CO. ON THAT ITEM, BEING THE HIGHEST, WAS ACCEPTED ON SEPTEMBER 20, 1960,AND THE ITEM WAS AWARDED TO THE COMPANY ON CONTRACT NO. N407S-11457. THE PURCHASE PRICE OF $1,501 WAS RETAINED FROM THE COMPANY'S BID DEPOSIT OF $4,150 AND THE EXCESS DEPOSIT IN THE AMOUNT OF $2,649 WAS REFUNDED TO IT.

BY LETTER DATED SEPTEMBER 22, 1960, THE CAPITAL INVESTMENT CO. ADVISED THE DISPOSAL ACTIVITY THAT IT HAD DISCOVERED THAT ITS BID OF $1,501 FOR ITEM NO. 151 WAS IN ERROR, EXPLAINING THAT THE BID WAS INTENDED FOR ITEM NO. 150 DESCRIBED AS A WARCO PRESS, BUT THAT IN FILLING OUT THE BID FORM THE BID PRICE WAS PLACED IN THE WRONG COLUMN OPPOSITE ITEM NO. 151 SINCE BOTH ITEMS WERE DESCRIBED AS PRESSES. THE DISPOSAL OFFICER ADVISED THE PURCHASER BY LETTER DATED SEPTEMBER 27, 1960, THAT HIS ACTIVITY HAD NO AUTHORITY TO RESCIND THE CONTRACT OR TO GRANT ANY RELIEF BECAUSE OF THE ALLEGED ERROR AS TO ITEM NO. 151. THEREAFTER, THE COMPANY REQUESTED RESCISSION OF THE CONTRACT AND THE RETURN TO IT OF THE RETAINED BID DEPOSIT. IN SUPPORT OF ITS CLAIM, THE COMPANY FORWARDED A PHOTOSTATIC COPY OF PAGE 28 OF THE BID INVITATION WHICH WAS USED AS A WORKSHEET IN THE PREPARATION OF ITS BID. THE COPY CONTAINS HAND WRITTEN NOTATIONS ON SEVERAL OF THE ITEMS LISTED ON THAT PAGE, INCLUDING ITEMS NOS. 150 AND 151. THERE APPEARS ON THE COPY ON ITEM NO. 150 PERTINENT DATA INCLUDING THE AMOUNT "/$1501)" AND ON ITEM NO. 151 APPEARS THE NOTATION "N.G.' THE BIDDER CONTENDS THAT THESE NOTATIONS INDICATE INTEREST IN ITEM NO. 150 ONLY AND SUBSTANTIATE ITS CONTENTION THAT ITS INTENTION WAS TO BID ON THAT ITEM.

IN A REPORT PERTAINING TO THE SALE TRANSACTION, THE DISPOSAL ACTIVITY STATED THAT IN VIEW OF THE EVIDENCE SUBMITTED BY THE BIDDER AND OF THE RESPECTIVE ESTIMATED ACQUISITION COSTS OF $4,204 FOR ITEM NO. 150 AND OF $1,200 FOR ITEM NO. 151, AS WELL AS A COMPARISON OF THE BIDS RECEIVED FOR ITEM NO. 150, IT IS THE OPINION OF THE DISPOSAL OFFICER THAT THE CLAIMANT'S BID OF $1,501 IS MORE IN LINE WITH THE NUMEROUS BIDS RECEIVED FOR ITEM NO. 150 (HIGH BID $2,193, SECOND HIGH BID $1,793), AND IT IS, THEREFORE, REASONABLE TO ASSUME THAT THE BIDDER MADE AN ERROR IN ITS BID, AS ALLEGED.

IN CASES WHERE A WIDE VARIANCE IN BIDS ON A SALE ITEM IS COUPLED WITH THE FACT THAT THE HIGH BID PRICE EXCEEDS THE ESTIMATED ACQUISITION COST OF THE MATERIAL BEING SOLD, WE BELIEVE A CONTRACTING OFFICER SHOULD BE CHARGED WITH NOTICE OF THE PROBABILITY OF ERROR IN THE BID AND THAT HE SHOULD REQUEST THE BIDDER TO VERIFY ITS BID PRIOR TO ACCEPTANCE THEREOF.

SINCE THAT SITUATION EXISTED HERE IT IS CONCLUDED THAT THE CONTRACTING OFFICER IS CHARGEABLE WITH CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR IN THE BID OF CAPITAL INVESTMENT CO., AND THAT SINCE THE COMPANY WAS NOT REQUESTED TO VERIFY ITS BID PRIOR TO ACCEPTANCE, THE ACCEPTANCE OF THE BID IN THESE CIRCUMSTANCES DID NOT RESULT IN A VALID AND BINDING CONTRACT. ACCORDINGLY, SINCE THE ERROR HAS BEEN SUFFICIENTLY ESTABLISHED CONTRACT NO. N407S-11457 MAY BE CANCELED AND CAPITAL INVESTMENT CO. MAY BE REFUNDED THE FULL AMOUNT OF ITS PURCHASE PRICE.