B-150852, JUN. 14, 1963

B-150852: Jun 14, 1963

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INC.: REFERENCE IS MADE TO YOUR LETTER OF APRIL 26. BIDS WERE REQUESTED ON THREE RANGE QUANTITIES. THE FIRST RANGE QUANTITY WAS FROM 8. YOU WERE AWARDED A CONTRACT ON DECEMBER 29. 759) WAS $92.59 PER UNIT AND THAT THE AWARD FOR 16. 759 UNITS AND ONE UNIT ONLY WAS TO BE COMPUTED AT $89.80. 757.61 YOU CONTEND THAT THE METHOD EMPLOYED IN SOLICITING BIDS MISLED BIDDERS AS TO THE MANNER IN WHICH BIDS WERE TO BE SUBMITTED. YOU STATE THAT THERE WAS AN AMBIGUITY IN THE WORDING OF THE INVITATION. IN THE DISALLOWANCE OF YOUR CLAIM IT WAS CORRECTLY STATED THAT THERE APPEARED NO AMBIGUITY WITH RESPECT TO THE RANGE QUANTITIES PROVISION. 759 UNITS) THE GOVERNMENT COULD HAVE PROPERLY AWARDED YOU A CONTRACT FOR 8.

B-150852, JUN. 14, 1963

TO THE CALMONT INDUSTRIES, INC.:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 26, 1963, RELATING TO YOUR CLAIM FOR $189,863.20, CONSISTING OF $46,757.61 ALLEGED TO BE DUE AS A RESULT OF AN ERRONEOUS UNIT PRICE AWARD UNDER RANGE BIDDING PROCEDURES, AND THE BALANCE FOR AN ERROR IN BID, IN CONNECTION WITH CONTRACT NO. DA 36 -039-SC-79103 DATED DECEMBER 29, 1960.

INVITATION FOR BIDS NO. SC-36-039-61-1477-C4-51 SOLICITED BIDS FOR FURNISHING TELEGRAPH-TELEPHONE SIGNAL CONVERTERS. BIDS WERE REQUESTED ON THREE RANGE QUANTITIES. THE FIRST RANGE QUANTITY WAS FROM 8,560 TO 16,759 CONVERTERS FOR WHICH YOU BID A UNIT PRICE OF $92.59. ON THE SECOND RANGE QUANTITY FROM 16,750 TO 24,960 YOU BID A UNIT PRICE OF $89.80, AND ON THE THIRD RANGE QUANTITY FROM 24,961 TO 33,160 YOU BID A UNIT PRICE OF $88.45. YOU WERE AWARDED A CONTRACT ON DECEMBER 29, 1960, FOR 16,760 UNITS AT YOUR BID PRICE OF $89.80 EACH, PLUS A NUMBER OF MINOR ITEMS, OR FOR A TOTAL OF $1,513,648. SUBSEQUENT TO THE AWARD YOU CONTENDED THAT YOUR BID ON THE FIRST RANGE QUANTITY (8,560 TO 16,759) WAS $92.59 PER UNIT AND THAT THE AWARD FOR 16,760 UNITS SHOULD NOT BE COMPUTED AT THE UNIT PRICE OF OF $89.80 BUT RATHER THAT YOU SHOULD BE ALLOWED $92.59 EACH FOR THE FIRST 16,759 UNITS AND ONE UNIT ONLY WAS TO BE COMPUTED AT $89.80. ACCORDINGLY, YOU CLAIMED AN ADDITIONAL AMOUNT OF $46,757.61. ALSO, YOU CLAIMED AN ADDITIONAL AMOUNT OF $143,105.59 BECAUSE OF A MISTAKE IN BID.

AS TO YOUR CLAIM FOR $46,757.61 YOU CONTEND THAT THE METHOD EMPLOYED IN SOLICITING BIDS MISLED BIDDERS AS TO THE MANNER IN WHICH BIDS WERE TO BE SUBMITTED. ALSO, YOU STATE THAT THERE WAS AN AMBIGUITY IN THE WORDING OF THE INVITATION. IN THE DISALLOWANCE OF YOUR CLAIM IT WAS CORRECTLY STATED THAT THERE APPEARED NO AMBIGUITY WITH RESPECT TO THE RANGE QUANTITIES PROVISION. FOR EXAMPLE, AS TO THE FIRST RANGE QUANTITY (8,560 TO 16,759 UNITS) THE GOVERNMENT COULD HAVE PROPERLY AWARDED YOU A CONTRACT FOR 8,560 UNITS (THE SMALLEST QUANTITY IN THE FIRST RANGE) AT $92.59 EACH. YOU HAD NO RESERVATION IN YOUR BID THAT IF THE GOVERNMENT ORDERED ANY QUANTITY IN EXCESS OF THE FIRST RANGE QUANTITY IT WOULD HAVE TO PAY FOR THE FIRST 16,759 UNITS AT THE FIRST RANGE QUANTITY PRICE. THE WORDING EMPLOYED IN THE INSTANT INVITATION HAS BEEN USED IN A NUMBER OF INVITATIONS AND INSOFAR AS THE RECORDS OF OUR OFFICE SHOW THERE HAS BEEN NO ALLEGATION OF AMBIGUITY. AS AN EXAMPLE, WE DESIRE TO POINT OUT THAT ON PAGE 21 OF YOUR BRIEF SUBMITTING THE CLAIM YOU REFER TO A LATER CONTRACT TO BMC INDUSTRIES, WHICH WAS YOUR SUBCONTRACTOR IN THE INSTANT CASE. THAT FIRM HAD BID A UNIT PRICE OF $106 FOR QUANTITIES FROM 2,625 TO 5,249; $100 FOR QUANTITIES FROM 5,250 TO 7,875; AND $99 FOR QUANTITIES FROM 7,876 TO 10,500. BMC INDUSTRIES WAS AWARDED A CONTRACT FOR 5,466 UNITS AT $100 EACH (THE PRICE FOR THE SECOND RANGE QUANTITY) AND WE DO NOT FIND THAT ANY CLAIM FOR ADDITIONAL MONEY WAS FILED IN OUR OFFICE. THE FACT THAT YOU MAY HAVE INTENDED TO BID ON A DIFFERENT BASIS THAN WHAT WAS SET OUT IN THE INVITATION CANNOT OBLIGATE THE GOVERNMENT TO PAY ANY ADDITIONAL AMOUNT UNDER THE CONTRACT.

WITH REGARD TO THE ALLEGED MISTAKE IN BID FOR WHICH YOU CLAIM AN ADDITIONAL $143,105.59, YOU STATE THAT:

"/D) THE TIME BETWEEN RECEIPT OF THE IFB AND THE SUBMISSION OF BIDS WAS LESS THAN A MONTH, ANF FOR THIS REASON IT WAS EXTREMELY DIFFICULT TO OBTAIN ACCURATE PRICES ON MANY OF THE PARTS WHICH WANT TO MAKE UP A COMPLETE UNIT. CALMONT WAS AWARE, HOWEVER, THAT MANY POTENTIAL SUPPLIERS WHO WERE ASKED TO RESPOND QUICKLY FOR QUOTATIONS WOULD (AND DID) QUOTE PRICES HIGHER THAN THEY WOULD WHEN A POTENTIAL BUYER WAS PREPARED TO ISSUE AN IMMEDIATE PURCHASE ORDER. FOR THIS REASON WHEN CALMONT ESTIMATED THE COST OF PARTS TO BE PURCHASED, IT MADE ALLOWANCE FOR SUBSEQUENT DOWNWARD NEGOTIATION OF THE QUOTATIONS. BASED ON ITS CALCULATIONS PRIOR TO SUBMISSION OF THE BID, CALMONT ESTIMATED THAT PARTS FOR EACH CONVERTER COULD BE PURCHASED FOR THE FOLLOWING PRICES:

TABLE

TRANSFORMERS $11.78

CASE AND COVER 9.00

PANEL.90

CHASSIS 4.00

TERMINAL BOARD 1.76

RELAYS 9.09

RESISTORS 1.73

TUBES 8.83

CAPACITORS 10.35

STATIC GENERATORS 18.32

MISCELLANEOUS PARTS .90

TOTAL $76.66

"A COPY OF CALMONT'S WORKSHEET IS ATTACHED MARKED EXHIBIT "M.'

"/E) AFTER RECEIPT OF THE NOTICE OF AWARD, A VERY EXTENSIVE "SHOPPING" CAMPAIGN WAS INSTITUTED BY CALMONT. NOTWITHSTANDING THIS EFFORT, BY 28 MARCH 1961, CALMONT WAS ONLY ABLE TO OBTAIN QUOTATIONS WHICH INDICATED THAT THE COST OF THE MATERIALS ALONE WOULD BE $91.75. THE NUMBER OF BIDS SOLICITED AND THE MATERIAL COSTS ARE SET FORTH BELOW:

TABLE

NUMBER OF BIDS LOWEST "ITEM SOLICITED ACCEPTABLE BID

TRANSFORMER 34 $14.50

CASE AND COVER 14 18.00

PANEL 16 1.75

CHASSIS 16 3.95

TERMINAL BOARDS 14 1.24

RELAYS 15 12.10

RESISTORS 4 1.70

TUBES 7 7.63

CAPACITORS 7 12.77

STATIC GENERATOR 14 16.07

MISCELLANEOUS PARTS VARIOUS 2.04

TOTAL $91.75

"/F) AS CAN BE SEEN FROM A COMPARISON OF CALMONT'S ESTIMATE SET FORTH IN SUBPARAGRAPH (D) AND THE QUOTATIONS RECEIVED AS OF 28 MARCH 1961, SET FORTH IN SUBPARAGRAPH (E), CALMONT HAD, IN PREPARING ITS BID, UNDERESTIMATED MATERIALS BY THE AMOUNT OF $15.09. THE ERROR WAS PARTICULARLY DAMAGING AS THE MANUFACTURING PROCESS CONSISTS SUBSTANTIALLY OF ASSEMBLING COMPONENTS MANUFACTURED BY OTHERS. WHEN THE MATERIAL COSTS AS OF MARCH 28TH WERE ADDED TO CALMONT'S ESTIMATE FOR LABOR AND OVERHEAD TO MANUFACTURE THE CONVERTER ON A UNIT BASIS, IT INDICATED A MINIMUM TOTAL MANUFACTURING COST TO CALMONT OF $115.62 PER UNIT. BY ASSUMING THE MINIMUM TOTAL MANUFACTURING COST TO BE $115.62, PERFORMANCE BY CALMONT UNDER THE CONTRACT PROMISED A CONTRACT LOSS OF APPROXIMATELY $430,000.00.'

IN YOUR LETTER OF APRIL 26, 1963, YOU STATE THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND ALTHOUGH THERE WAS A ROUTINE REQUEST BY THE CONTRACTING OFFICER FOR PRICE VERIFICATION YOU WERE NOT INFORMED THAT YOUR BID WAS OUT OF LINE WITH OTHER BIDS. THIS STATEMENT IS IN CONFLICT WITH THE FACTS AS REPORTED IN A MEMORANDUM OF DECISION BY THE ACTING CHIEF, PROCUREMENT AND DISTRIBUTION DIVISION, OFFICE OF THE CHIEF SIGNAL OFFICER, DATED APRIL 13, 1962. ON PAGES 5 AND 6 OF THAT MEMORANDUM IT IS STATED THAT:

"/2) THE ALLEGATIONS RELATING TO THE EXISTENCE OF GROSS MISTAKE CHARGEABLE TO THE CONTRACTING OFFICER ARE NOT SUPPORTED BY THE EVIDENCE. THE RECORD INDICATES THAT ON THREE SEPARATE OCCASIONS PRIOR TO AWARD THE GOVERNMENT REPRESENTATIVES NOT ONLY WARNED THE CONTRACTOR OF THE POSSIBLE EXISTENCE OF ERROR, BUT POINTED OUT THE SPECIFIC AREA IN QUESTION TO RESPONSIBLE OFFICIALS OF THE CONTRACTOR, WHO, NEVERTHELESS, REAFFIRMED THE BID WITH FULL KNOWLEDGE OF RISKS VOLUNTARILY ASSUMED BY ADHERENCE THERETO. SPECIFICALLY, THE INITIAL CONTACT WAS BETWEEN THE GOVERNMENT PURCHASING AGENT AND THE OFFICIAL WHO HAD SIGNED THE BID, THE CONTRACTOR'S MANAGER, MARKETING AND CONTRACTS, ON 7 DECEMBER 1960. THE CONTRACTOR'S PURCHASING OFFICER WAS ADVISED IN PERSON THAT NOT ONLY DID THE CONTRACTOR'S BID APPEAR TO BE UNUSUALLY LOW BY CONTRAST WITH THOSE OF THE OTHER BIDDERS, BUT THAT GREAT CARE MUST BE TAKEN IN ESTIMATING THE COST OF A CERTAIN COMPONENT VIZ., THE CASE. THE COMPANY REPRESENTATIVE INSISTED THAT HE COULD PROCURE THE ITEM AT A FAVORABLE PRICE. HE FURTHER AGREED TO FURNISH WRITTEN VERIFICATION OF THE CORRECTNESS OF THE BID. ON 22 DECEMBER 1960 THE CONTRACTING OFFICER REQUESTED VERIFICATION, AND RECEIVED SUCH A TELEGRAM FROM THE CONTRACTOR'S VICE PRESIDENT AND GENERAL MANAGER. ON 29 DECEMBER 1960, PRIOR TO AWARD, THE CONTRACTING OFFICER PERSONALLY CONTACTED THE FIRM'S MANUFACTURING MANAGER AGAIN, POINTING OUT THE POSSIBILITY OF ERROR IN ESTIMATES OF THE COST OF THE COMPONENT IN QUESTION, WHICH THE CONTRACTOR NOW CLAIMS WAS RESPONSIBLE FOR 75 PERCENT OF THE LOSS, BUT THE LATTER ASSURED THE CONTRACTING OFFICER NOT ONLY THAT THE COMPANY WAS AWARE OF THE RISKS ARISING FROM THE BID BUT DESIRED TO REAFFIRM. IT APPEARS, FROM THE APPLICATION, THAT THE COMPANY DID SOLICIT BIDS FROM SUPPLIERS ON THE ESSENTIAL COMPONENTS PRIOR TO PREPARATION OF ITS BID BUT CONSIDERING THE COMPONENT CHARGES TO BE EXCESSIVE, REDUCED MATERIAL ESTIMATES BY 50 PERCENT, AND FOLLOWED THIS WITH AN OVER-ALL BID PRICE REDUCTION TO $92.59, $89.80 AND $80.45 IN EACH RANGE ON THE BASIS OF AN OPINION EXPRESSED BY ITS MARKETING BRANCH THAT THE "AWARD WOULD PROBABLY BE LET AT CLOSE TO $90.00.' IT IS READILY APPARENT THAT THE CONTRACTOR, DESPITE THE KNOWLEDGE AVAILABLE FROM A CANVASS OF SUPPLIERS, AND IN THE FACE OF ITS OWN ESTIMATES, RECONSTRUCTED ITS BID TO ARRIVE AT AN ARBITRARY FIGURE INTENDED TO ASSURE AN AWARD. AFTER RECEIPT OF THE AWARD THE CONTRACTOR THEN PROCEEDED ON A "SHOPPING CAMPAIGN," RECEIVING CONFIRMATION OF INFORMATION WHICH IT HAD PREVIOUSLY DISREGARDED AT ITS OWN RISK, VIZ., THAT THE MATERIAL COSTS WERE AS HIGH AS ITS ORIGINAL ESTIMATES HAD INDICATED. IN PARTICULAR, THE PRICE OF THE IMPORTANT COMPONENT TO WHICH THE CONTRACTOR ASCRIBES A LARGE PORTION OF ITS LOSS WAS NOT REDUCED AS HAD BEEN EXPECTED; IN FACT, THE PRICES WERE TWICE AS GREAT AS THE AMOUNT ARBITRARILY SET ASIDE THEREFOR.

"/3) THE GOVERNMENT AND ITS AGENTS ARE, UNDOUBTEDLY, PRECLUDED FROM TAKING UNFAIR ADVANTAGE OF A CONTRACTOR WHOSE BID IS KNOWN TO BE ERRONEOUS, OR WHERE THE CONTRACTING OFFICER HAS REASON TO KNOW OF THE EXISTENCE OF ERROR. HOWEVER, THE RESPONSIBILITY FOR THE PREPARATION OF A BID RESTS WITH THE BIDDER. WHEN A CONTRACTING OFFICER INFORMS HIM OF THE POSSIBILITY OF ERROR, AND INDICATES WITH PARTICULARITY THE AREA OF MISTAKE, AND DESPITE REPEATED WARNINGS, THE CONTRACTOR, WITH KNOWLEDGE THEREOF, AS A MATTER OF JUDGMENT, INSISTS UPON CONSIDERATION OF HIS BID, HE MUST ASSUME THE RISK INHERENT IN SUCH A SITUATION. IF HIS JUDGMENT, BASED UPON THE FACTS KNOWN OR DISCLOSED TO HIM, IS IN ERROR AND HE STANDS TO LOSE THEREBY, HE CAN HARDLY COMPLAIN THAT THE CONTRACTING OFFICER UNDER THE RIGID REQUIREMENTS OF THE CURRENT SYSTEM OF FORMAL ADVERTISING AND SEALED BIDDING IS REQUIRED TO CONSIDER THE BID. OTHERWISE, TO ALLOW THE CONTRACTOR TO WITHDRAW HIS INTENDED BID MERELY BECAUSE OF THE MISTAKE IN JUDGMENT WOULD TEND TO PERVERT AND UNDERMINE THE ENTIRE BASIS FOR THE COMPETITIVE BID PROCESS, AND ENCOURAGE IRRESPONSIBLE BIDDING PRACTICES.'

THE FOREGOING FACTS INDICATE THAT THE GOVERNMENT HAD WARNED YOU OF A POSSIBLE MISTAKE IN YOUR BID AND THAT IN SPITE OF THESE WARNINGS YOU ASSUMED, WITHOUT GETTING PRICE CONFIRMATIONS, THAT YOU COULD PROCURE THE COMPONENTS FOR LESS THAN WHAT YOU HAD TO PAY FOR THEM EVENTUALLY. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT THE GOVERNMENT WAS COMPLETELY JUSTIFIED IN INSISTING ON PERFORMANCE AT THE CONTRACT PRICE.

ACCORDINGLY, WE FIND NO LEGAL BASIS FOR AN ALLOWANCE OF AN AMOUNT IN ADDITION TO THE CONTRACT PRICE WHICH HAS BEEN PAID.