B-145681, MAY 2, 1961

B-145681: May 2, 1961

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

UNITED STATES DEPARTMENT OF THE INTERIOR: REFERENCE IS MADE TO YOUR LETTER PD AND C OF APRIL 18. THE PROJECT IS DIVIDED INTO FIVE ITEMS. THE FIFTH IS AN "ALL OR NONE" PROPOSITION. THE ERROR IN BID IS ALLEGED TO HAVE OCCURRED ON BASE PROPOSAL 2. THIS IS THE ONLY PROPOSAL UPON WHICH REX ADAMS BID. THE PRICE WAS $193. THE GOVERNMENT ESTIMATE WAS $213. GENERAL OVERHEAD WAS SEVEN (7) PERCENT BASED ON THE SUBTOTAL CORRECTION THE OVERHEAD COST WOULD HAVE BEEN $12. THE INSURANCE IS FIGURED ON A RATE OF APPROXIMATELY 10 PERCENT OF ESTIMATED LABOR COST. 000.00 WAS ADDED FOR THIS PROJECT BASED ON SIZE OF PROJECT. OUR CORRECT TOTAL WOULD HAVE READ $213. AN EXAMINATION OF THE BIDDER'S WORKSHEET DOES NOT INDICATE THAT PREPARATION OF THE ORIGINAL BID WAS AS PRECISE AS THE CORRECTION OF THE BID NOW CLAIMED.

B-145681, MAY 2, 1961

TO MR. RALPH W. MIZE, CHIEF, BRANCH OF PLANT DESIGN AND CONSTRUCTION, UNITED STATES DEPARTMENT OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER PD AND C OF APRIL 18, 1961, WITH ENCLOSURES, REQUESTING A DECISION WHETHER REX ADAMS, TULAROSA, NEW MEXICO, SHOULD BE PERMITTED TO CORRECT THE BID MADE ON BASE PROPOSAL 2, COVERED IN PROJECT ABU-PH-53 AND BU 603-654 FOR CONSTRUCTION OF CERTAIN HOUSING FACILITIES, BECAUSE OF AN ERROR ALLEGED UPON REQUEST FOR VERIFICATION.

ESSENTIALLY, THE PROJECT IS DIVIDED INTO FIVE ITEMS, EACH DESIGNATED A "BASE PROPOSAL.' EACH OF THE FIRST FOUR ITEMS CONSISTS OF A SEPARATE GROUP OF LOCATIONS. THE FIFTH IS AN "ALL OR NONE" PROPOSITION. THE ERROR IN BID IS ALLEGED TO HAVE OCCURRED ON BASE PROPOSAL 2. THIS IS THE ONLY PROPOSAL UPON WHICH REX ADAMS BID. THE PRICE WAS $193,000. FIVE OTHER BIDDERS ALSO BID ON ALL THE LOCATIONS IN THIS GROUP. THEIR BIDS RANGED FROM $218,745 TO $239,786. THE GOVERNMENT ESTIMATE WAS $213,095.

FOLLOWING A REQUEST TO CONFIRM THE BID, THE LOW BIDDER ADVISED IN A SWORN STATEMENT THAT IN PREPARING ITS BID, TO ARRIVE AT THE TOTAL BID PRICE, IT ADDED THE FIGURES SHOWN ON ITS WORKSHEET ON AN ADDING MACHINE AND WHILE SO DOING OVERLOOKED A $9,506 ITEM, COVERING GRADING, STREETS, DRIVES, WALKS AND FENCING, AND ADDED A $12,340 ITEM, COVERING OVERHEAD, AS $2,340. COMPARISON OF THE ADDING MACHINE TAPE WITH THE WORKSHEET REVEALS THE OVERSIGHT.

HOWEVER, THE BIDDER CONTENDS THAT THE BID SHOULD BE CORRECTED IN AN AMOUNT THAT NOT ONLY REFLECTS THE AMOUNTS NOT ORIGINALLY ADDED, BUT ALSO INCLUDES A PROPORTIONATE INCREASE OF 7 PERCENT FOR OVERHEAD, OF 1 PERCENT FOR TAXES AND OF 1 PERCENT FOR BOND, ALL OF WHICH, ALLEGEDLY HAD BEEN BASED UPON THE ERRONEOUS SUBTOTAL THAT DID NOT INCLUDE THE $9,506 ITEM. THE BIDDER STATES IN LETTER OF APRIL 13, 1961,---

"THE SUBTOTAL SHOULD READ $183,906.00 WITH THE ADDITION OF GRADING, STREETS, DRIVES, FENCING, AND WALKS. OUR OVERHEAD ON THIS PROJECT BASED ON JOB EXPENSE, SUPERVISION, AND GENERAL OVERHEAD WAS SEVEN (7) PERCENT BASED ON THE SUBTOTAL CORRECTION THE OVERHEAD COST WOULD HAVE BEEN $12,873.00. THE 1 PERCENT STATE TAX WOULD THEN BE $2,092.00 BASED ON A PROFIT FIGURE OF $8,000.00 AND INSURANCE AT $4,500.00. THE 1 PERCENT BOND WOULD THEN BE $2,133.00 BASED ON A SUBTOTAL OF $211,371.00. THE INSURANCE IS FIGURED ON A RATE OF APPROXIMATELY 10 PERCENT OF ESTIMATED LABOR COST, OR $4,500.00. THE ABOVE ITEMS WOULD BRING THE SUBTOTAL BEFORE PROFIT TO THE AMOUNT OF $205,484.00. A PROFIT OF $8,000.00 WAS ADDED FOR THIS PROJECT BASED ON SIZE OF PROJECT, AMOUNT SUBCONTRACTED, AND 270 DAYS COMPLETION TIME. OUR CORRECT TOTAL WOULD HAVE READ $213,484.00 HAD THE ERRORS NOT OCCURRED.'

AN EXAMINATION OF THE BIDDER'S WORKSHEET DOES NOT INDICATE THAT PREPARATION OF THE ORIGINAL BID WAS AS PRECISE AS THE CORRECTION OF THE BID NOW CLAIMED. FOR EXAMPLE, IN THE LETTER OF APRIL 13, 1961, IT IS STATED THAT THE OVERHEAD IS FIGURED AT 7 PERCENT OF THE SUBTOTAL. IN THE WORKSHEET THE SUBTOTAL IS SHOWN AS $174,400. MULTIPLICATION OF THAT FIGURE BY 7 PERCENT WOULD RESULT IN $12,208, NOT $12,340 AS SHOWN IN THE WORKSHEET. FURTHER, IN THE LETTER IT IS STATED THAT THE TAXES ARE 1 PERCENT OF THE TOTAL OF SUBTOTAL, OVERHEAD, PROFIT AND INSURANCE. APPLYING THE 1 PERCENT RATE TO THE TOTAL ARRIVED AT BY ADDING THE RESPECTIVE AMOUNTS SHOWN ON THE WORKSHEET, THE TAX SHOULD BE $1,992, BUT THE WORKSHEET RECORDS IT AS $1,900. REGARDING THE BOND AMOUNT, THE BIDDER STATES THAT IT IS ARRIVED AT BY TAKING 1 PERCENT OF THE TOTAL REACHED BY ADDING THE SUBTOTAL, OVERHEAD, PROFIT, INSURANCE AND TAX, BUT THE AMOUNT SHOWN ON THE WORKSHEET ($1,900) IS LESS THAN THE AMOUNT THAT WOULD BE ARRIVED AT IN CARRYING OUT THE COMPUTATIONS AS SUGGESTED ($2,012).

THEREFORE, IT APPEARS THAT THE VARIOUS PERCENTAGES ARE APPROXIMATIONS ONLY AND, WHILE THE BIDDER WOULD BE CONTENT TO BE BOUND BY THOSE PERCENTAGE RATES NOW, IT IS NOT CLEARLY ESTABLISHED THAT THE BIDDER INTENDED TO RELY UPON, OR DID IN FACT RELY UPON, SUCH A STRICT APPLICATION AT THE TIME THE BID WAS PREPARED. BECAUSE THE VARIOUS NECESSARY COMPUTATIONS HAD NOT BEEN MADE WHEN THE BID WAS PREPARED, THERE IS CONSIDERABLE DOUBT AS TO THE ACTUAL AMOUNTS THAT WOULD HAVE BEEN STATED FOR THE PARTICULAR ITEMS. FURTHERMORE, WE NOTE THAT ADAMS DOES NOT CLAIM AN INCREASE IN HIS ORIGINAL PROFIT FIGURE OF $8,000 ALTHOUGH HE STATES THIS FIGURE WAS BASED IN PART ON THE SIZE OF THE PROJECT. SINCE INCLUSION OF THE OMITTED ITEMS WOULD HAVE SUBSTANTIALLY INCREASED THE SIZE OF THE PROJECT SO FAR AS COST TO ADAMS WOULD HAVE BEEN CONCERNED, IT IS REASONABLE TO ASSUME THAT HAD THE ERROR NOT OCCURRED THE PROFIT INCLUDED FOR THE JOB WOULD HAVE EXCEEDED THE $8,000 FIGURE BY AN AMOUNT WHICH CANNOT NOW BE ACCURATELY DETERMINED.

IN THESE CIRCUMSTANCES, THE BID SHOULD NOT BE CHANGED. HOWEVER, SINCE THE BIDDER HAS INDICATED, IN LETTER OF APRIL 13, 1961, WILLINGNESS TO ACCEPT THE CONTRACT AT THE ORIGINAL BID PRICE, IF CORRECTION IS NOT PERMITTED, A CONTRACT MAY BE AWARDED ON THAT BASIS-- OTHERWISE THE ..END :