B-149118, JUN. 25, 1962

B-149118, JUN. 25, 1962

TO DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO A LETTER DATED JUNE 5, 1962, WITH ENCLOSURES, REFERENCE NO. DSAH-G, FROM GEORGE W. SHELHORSE, ASSISTANT COUNSEL, REQUESTING A DECISION AS TO WHETHER AIR FORCE CONTRACT NO. 4304 PROPERLY MAY BE RESCINDED IN VIEW OF AN ERROR ALLEGED TO HAVE BEEN MADE IN THE BID OF THE SAMUEL G. KEYWELL CO., INC., DETROIT, MICHIGAN, UPON WHICH THE CONTRACT WAS AWARDED.

THE RECORD SHOWS THAT PURSUANT TO INVITATION FOR BIDS NO. AF 04-607 S-62- 27 DATED MARCH 9, 1962--- OPENING DATE APRIL 4, 1962--- THE SAMUEL G. KEYWELL CO., INC., SUBMITTED A BID OF $0.117 PER POUND, TOTAL OF $2,106, ON ITEM NO. 3 DESCRIBED AS 18,000 POUNDS OF STEEL SCRAP CONSISTING OF DEMILITARIZED 50 CALIBER MACHINE GUN BARREL SECTIONS. ONLY ONE OTHER BID WAS RECEIVED ON THAT ITEM, WHICH WAS IN THE AMOUNT OF $0.0176 PER POUND. THE BID OF THE SAMUEL G. KEYWELL CO., INC., BEING THE LOWEST, WAS ACCEPTED ON APRIL 9, 1962, AND AWARD OF THE MATERIAL IN ITEM NO. 3 WAS MADE TO THE COMPANY AT ITS BID PRICE OF $0.117 PER POUND ON SALES CONTRACT NO. 4303, THE TOTAL SALE PRICE OF $2,106 FOR ITEM NO. 3 BEING DEDUCTED FROM THE COMPANY'S BID DEPOSIT OF $3,300 FORWARDED WITH ITS BID FOR SEVERAL ITEMS BID ON IN THE TOTAL AMOUNT OF $16,455.66.

SUBSEQUENTLY, THE PURCHASER ADVISED THE CONTRACTING OFFICER AT THE DEFENSE SURPLUS SALES OFFICE AT NORTON AIR FORCE BASE, CALIFORNIA, THAT IT HAD MADE A MISTAKE IN ITS BID, EXPLAINING THAT IT HAD INTENDED TO BID $0.0117 PER POUND ON ITEM NO. 3 BUT IN TRANSFERRING THE INTENDED BID PRICE FROM ITS WORKSHEET TO THE BID FORM THE PRICE WAS INADVERTENTLY ENTERED AS $0.117. IN SUPPORT OF ITS ALLEGATION OF ERROR THE PURCHASER SUBMITTED THE WORKSHEET OF COMPUTATIONS ON WHICH IT FIGURED ITS BID PRICE, WITH AN EXPLANATION OF THE METHOD USED IN ARRIVING AT THE PRICE OF $0.0117, WHICH TENDS TO SUPPORT ITS STATEMENT THAT IT INTENDED TO BID $0.0117 INSTEAD OF $0.117 PER POUND AS APPEARED ON ITS BID.

IN HIS STATEMENT OF FACTS REGARDING THE INSTANT SALE TRANSACTION THE CONTRACTING OFFICER REPORTS THAT, UPON ANALYZING THE TWO BIDS RECEIVED ON ITEM NO. 3 PRIOR TO AWARD, HE CONSIDERED THE SAMUEL G. KEYWELL CO., INC., BID OF $0.117 AS EXCESSIVELY HIGH BUT AFTER VERIFYING THAT ALL CALCULATIONS ON THE BID SHEET WERE CORRECT AND KNOWING THAT THE BIDDER WAS ONE OF THE LARGEST TEMPERATURE ALLOY BUYERS IN THE COUNTRY HE THOUGHT THAT ITS BID "COULD BE REALISTIC" AND THEREFORE ACCEPTED THE BID WITHOUT FIRST REQUESTING VERIFICATION BY THE BIDDER. THE CONTRACTING OFFICER NOW STATES, HOWEVER, THAT BASED ON THE GROUND THAT THE VALUE OF THE PROPERTY INVOLVED IN THE INSTANT SALE WAS MUCH LOWER THAN THE BID PRICE SUBMITTED BY THE PURCHASER, BECAUSE OF RECENT PAST SALE EXPERIENCE REVEALING A MUCH LOWER RETURN FOR IDENTICAL PROPERTY SOLD BY HIM WITH PRICES RECEIVED OF $0.025 TO $0.055 PER POUND, IN WHICH SALE THE SAMUEL G. KEYWELL CO., INC., DID NOT PARTICIPATE, AND BECAUSE OF THE SMALL NUMBER OF BUYERS WHO BID ON ITEM NO. 3, THE PROBABILITY OF ERROR IN THE KEYWELL CO. BID ON ITEM NO. 3 WAS APPARENT AND HE SHOULD HAVE REQUESTED VERIFICATION OF ITS BID PRIOR TO ACCEPTANCE THEREOF.

IN VIEW OF THE FOREGOING, THE CONTRACTING OFFICER RECOMMENDS THAT THE SAMUEL G. KEYWELL CO., INC., BE RELEASED FROM THE CONTRACT, AND THAT NO AWARD BE MADE FOR THE SALE OF THIS MATERIAL, SINCE THE ONLY OTHER BID RECEIVED WAS $0.0176 PER POUND WHICH IS BELOW THE UPSET PRICE ESTABLISHED OF $0.03 PER POUND.

WHILE A DIFFERENCE IN THE PRICES QUOTED FOR GOVERNMENT SCRAP PROPERTY WOULD NOT NECESSARILY PLACE A CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR AS WOULD A LIKE DIFFERENCE IN THE PRICES QUOTED ON NEW PROPERTY FOR SALE TO THE GOVERNMENT, IT MUST BE CONCEDED IN THE INSTANT CASE THAT IN VIEW OF THE FACT THAT THE VALUE OF THE PROPERTY INVOLVED WAS MUCH LOWER THAN THE PURCHASER'S BID PRICE, WHICH FACT IS SUBSTANTIATED BY THE PRICE RECEIVED ON IDENTICAL PROPERTY AT A RECENT PAST SALE BY THE CONTRACTING OFFICER, THE POSSIBILITY OF ERROR IN THE BID OF THE SAMUEL G. KEYWELL CO., INC., WAS APPARENT AND SHOULD NOT HAVE BEEN ACCEPTED WITHOUT FIRST REQUESTING THE BIDDER FOR VERIFICATION THEREOF.

ACCORDINGLY, AND SINCE THE RECORD INDICATES THAT THE SAMUEL G. KEYWELL CO., INC., PROMPTLY BROUGHT THE ALLEGED ERROR TO THE ATTENTION OF THE CONTRACTING OFFICER UPON ITS RECEIPT OF NOTICE OF THE AWARD AND PRESENTED EVIDENCE SUBSTANTIATING THE ERROR, CONTRACT NO. 4303 MAY BE RESCINDED AS RECOMMENDED BY THE CONTRACTING OFFICER AND THE ACTING COUNSEL, DEFENSE LOGISTICS SERVICES CENTER.