B-149138, JUN. 29, 1962

B-149138: Jun 29, 1962

Additional Materials:

Contact:

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

 

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

MABEE AND REYNARD WERE AT THE SAME UNIT PRICES AS THOSE THE CONTRACTOR STATES IT INTENDED TO OFFER ON THE CURRENT CONTRACT. THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF THIS ERROR. SINCE THE CONTRACTOR IS THE SOLE SUPPLIER OF THESE DRUGS AND THEREFORE ENCOUNTERED NO COMPETITION IN OFFERING TO PERFORM THE CONTRACT. THERE EXISTED NO MEANS BY WHICH THE CONTRACTING OFFICER COULD HAVE COMPARED THE PROPOSAL PRICE AGAINST PRICES WHICH OTHERWISE MIGHT HAVE BEEN SUBMITTED BY OTHER BIDDERS. DESTINATION BASIS WOULD HAVE SHOWN THAT THE CONTRACTOR HAD EITHER MADE AN ERROR OR HAD SUBSTANTIALLY REDUCED THE PRICE OF THE PROPRIETARY DRUGS OFFERED. WE AGREE THAT THE CONTRACTING OFFICER SHOULD HAVE ENTERTAINED SUFFICIENT DOUBT TO WARRANT AN INQUIRY TO THE CONTRACTOR TO CONFIRM THE OFFERED PRICE.

B-149138, JUN. 29, 1962

TO ADMINISTRATOR, VETERANS ADMINISTRATION:

YOUR LETTER 031C DATED JUNE 8, 1962, ASKS IF CONTRACT V7023P8268 NEGOTIATED WITH MAGNUS, MABEE AND REYNARD, INC., FOR THE AGENCY'S NEEDS DURING FISCAL YEAR 1963 FOR CERTAIN PROPRIETARY DRUGS MANUFACTURED BY THE CONTRACTOR, MAY BE REFORMED FRPM AN F.O.B. DESTINATION BASIS TO AN F.O.B. ORIGIN BASIS.

AFTER AWARD THE CONTRACTOR ALLEGED THAT IN COMPUTING ITS PROPOSAL PRICE IT ERRONEOUSLY INCLUDED FREIGHT CHARGES TO SOMERVILLE, NEW JERSEY, CAUSING A SLIGHT INCREASE IN THE UNIT PRICE IT OFFERED AND HAD ACCEPTED IN F.O.B. ORIGIN, NEW YORK, CONTRACTS FOR THE THREE PREVIOUS YEARS, AND THAT CONTRARY TO A PROVISION OF THE INVITATION STATING THAT FREIGHT CHARGES WOULD BE CONSIDERED F.O.B. TO VARIOUS UNDETERMINED DESTINATIONS IF THE BIDDER FAILED TO INDICATE ITS F.O.B. POINT, AND A NOTATION IN A LETTER CONFIRMING ITS QUOTATION AND OFFERING TERMS F.O.B. DESTINATION, IT DID NOT INTEND TO OFFER PRICES ON AN F.O.B. DESTINATION BASIS. THE CONTRACTOR REQUESTS THAT THE AMOUNT REPRESENTING THE FREIGHT CHARGES TO SOMERVILLE BE SUBTRACTED FROM THE UNIT PRICES AND THAT THE CONTRACT BE CHANGED TO AN F.O.B. ORIGIN BASIS.

THE OFFICE OF THE ASSISTANT ADMINISTRATOR FOR MANAGEMENT SERVICES REPORTS THAT THE THREE PREVIOUS ANNUAL CONTRACTS WITH MAGNUS, MABEE AND REYNARD WERE AT THE SAME UNIT PRICES AS THOSE THE CONTRACTOR STATES IT INTENDED TO OFFER ON THE CURRENT CONTRACT; THAT THE INCREASE OVER THE ALLEGED INTENDED PROPOSAL PRICE DOES IN FACT REPRESENT THE ADDITIONAL TRANSPORTATION COST WHICH WOULD BE INVOLVED IN SHIPPING THE GOODS TO SOMERVILLE, NEW JERSEY; AND THAT THE INCREASES OVER THE ALLEGED INTENDED PROPOSAL PRICE WOULD BE INSUFFICIENT TO COVER THE COST OF SHIPPING TO STATIONS LOCATED IN 48 STATES. THE REPORT CONCLUDES THAT THE CONTRACTOR DID MAKE THE MISTAKE IT ALLEGES IT MADE, AND THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF THIS ERROR.

SINCE THE CONTRACTOR IS THE SOLE SUPPLIER OF THESE DRUGS AND THEREFORE ENCOUNTERED NO COMPETITION IN OFFERING TO PERFORM THE CONTRACT, THERE EXISTED NO MEANS BY WHICH THE CONTRACTING OFFICER COULD HAVE COMPARED THE PROPOSAL PRICE AGAINST PRICES WHICH OTHERWISE MIGHT HAVE BEEN SUBMITTED BY OTHER BIDDERS. HOWEVER, IN VIEW OF THE FACT THAT IN THE PAST THREE YEARS THE CONTRACTOR HAD CONSISTENTLY BID F.O.B. ORIGIN AT THE SAME UNIT PRICES IT SAYS IT INTENDED TO OFFER ON THIS CONTRACT, AND THAT AN ANALYSIS OF THE PROPOSAL ON AN F.O.B. DESTINATION BASIS WOULD HAVE SHOWN THAT THE CONTRACTOR HAD EITHER MADE AN ERROR OR HAD SUBSTANTIALLY REDUCED THE PRICE OF THE PROPRIETARY DRUGS OFFERED, WE AGREE THAT THE CONTRACTING OFFICER SHOULD HAVE ENTERTAINED SUFFICIENT DOUBT TO WARRANT AN INQUIRY TO THE CONTRACTOR TO CONFIRM THE OFFERED PRICE.

IN VIEW THEREOF AND SINCE THE PROCUREMENT OF THIS PROPRIETARY ITEM HAS BEEN NEGOTIATED WITH THE SOLE SOURCE OF SUPPLY, WHICH HAS AN OPTION TO CANCEL THE CONTRACT UPON GIVING 15 DAYS WRITTEN NOTICE, AND SINCE THE ALLEGEDLY INTENDED OFFER OF UNIT PRICES IS IDENTICAL WITH THE UNIT PRICES OF THE PAST THREE ANNUAL CONTRACTS, AND IS ACCEPTABLE TO YOUR AGENCY, THIS OFFICE WILL NOT OBJECT TO A REFORMATION OF THE CONTRACT ON AN F.O.B. ORIGIN BASIS.