B-151963, AUG. 16, 1963

B-151963: Aug 16, 1963

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TO BRINER: REFERENCE IS MADE TO YOUR LETTER DATED JULY 2. IS ENTITLED TO AN UPWARD ADJUSTMENT IN PRICE BY VIRTUE OF AN ERROR IN BID ALLEGED AFTER AWARD OF CONTRACT NO. THE INVITATION WAS ISSUED ON JANUARY 30. WHICH REQUIREMENTS WERE ESTIMATED AT 10. WAS RAISED FROM 1.5 PERCENT TO 2 PERCENT. IN RESPONSE TO THE INVITATION BIDS WERE SUBMITTED ON A PER GALLON BASIS AS FOLLOWS: DIXIE JANITOR SUPPLY COMPANY. WAS DECLARED NONRESPONSIVE AS THE RESULT OF THAT COMPANY'S FAILURE TO SUBMIT THE REQUIRED TEN-GALLON SAMPLE OF ITS PRODUCT FOR TESTING. AFTER BID OPENING THE SAMPLES SUBMITTED WERE SUBJECTED TO TESTING FOR THE PURPOSE OF ASCERTAINING THEIR CONFORMITY WITH THE SPECIFICATIONS. IN PERTINENT PART: "WE ARE INTERESTED IN RECEIVING YOUR ANALYSIS OF THESE BIDS.

B-151963, AUG. 16, 1963

TO WALTER N. TO BRINER:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 2, 1963, REQUESTING A DETERMINATION AS TO WHETHER THE MICHLIN CHEMICAL CORPORATION, OF DETROIT, MICHIGAN, IS ENTITLED TO AN UPWARD ADJUSTMENT IN PRICE BY VIRTUE OF AN ERROR IN BID ALLEGED AFTER AWARD OF CONTRACT NO. S-13381 ISSUED UNDER INVITATION NO. 633075-EM FOR THE FURNISHING OF TREE SPRAYING INSECTICIDE.

THE INVITATION WAS ISSUED ON JANUARY 30, 1963, WITH A SCHEDULED BID OPENING DATE OF FEBRUARY 13, 1963, SOLICITING BIDS TO SUPPLY ALL THE REQUIREMENTS FOR SPECIAL FORMULA INSECTICIDE OF THE GOVERNMENT OF THE DISTRICT OF COLUMBIA, DEPARTMENT OF HIGHWAYS AND TRAFFIC, DURING THE PERIOD OF MARCH 1, 1963, UNTIL FEBRUARY 29, 1964, WHICH REQUIREMENTS WERE ESTIMATED AT 10,000 GALLONS. A SPECIAL CONDITION OF THE INVITATION STATED THAT THE DISTRICT DID NOT COMMIT ITSELF TO PURCHASE ANY DEFINITE QUANTITY UNDER THE CONTRACT.

ALTHOUGH THE ITEM HAD BEEN PURCHASED PREVIOUSLY ON SEVERAL OCCASIONS, WITH ONE PRIOR CONTRACT HAVING BEEN LET TO MICHLIN CHEMICAL CORPORATION, THE SPECIFICATION HAD RECENTLY BEEN REVISED AND THE INVITATION IN POINT REPRESENTED THE FIRST PURCHASE MADE UNDER THE REVISED SPECIFICATIONS. AMONG SEVERAL CHANGES MADE BY THE REVISION, THE PERCENTAGE OF ONE COMPONENT, ROTENONE, WAS RAISED FROM 1.5 PERCENT TO 2 PERCENT.

IN RESPONSE TO THE INVITATION BIDS WERE SUBMITTED ON A PER GALLON BASIS AS FOLLOWS: DIXIE JANITOR SUPPLY COMPANY, INCORPORATED, $2.65; MICHLIN CHEMICAL CORPORATION $2.00; S. B. PENICK AND COMPANY, $4.67; CHEMICAL INSECTICIDE CORPORATION, $4.77; LEBANON CHEMICAL CORPORATION, $6.90. THE BID OF DIXIE JANITOR SUPPLY COMPANY, INCORPORATED, WAS DECLARED NONRESPONSIVE AS THE RESULT OF THAT COMPANY'S FAILURE TO SUBMIT THE REQUIRED TEN-GALLON SAMPLE OF ITS PRODUCT FOR TESTING.

AFTER BID OPENING THE SAMPLES SUBMITTED WERE SUBJECTED TO TESTING FOR THE PURPOSE OF ASCERTAINING THEIR CONFORMITY WITH THE SPECIFICATIONS. IMMEDIATELY AFTER THE PUBLIC DISCLOSURE OF BIDS AND DURING THE COURSE OF THE TESTING, THE DISTRICT RECEIVED A LETTER DATED FEBRUARY 15, 1963, FROM S. B. PENICK AND COMPANY WHICH STATED, IN PERTINENT PART:

"WE ARE INTERESTED IN RECEIVING YOUR ANALYSIS OF THESE BIDS. THE TWO BIDDERS WHO BID UNDER $3.00 MOST CERTAINLY INTERPRETED YOUR SPECIFICATIONS DIFFERENTLY THAN WE DID. IF THESE PRODUCTS MEET THE SPECIFICATIONS CALLED FOR IN THIS BID, WE CERTAINLY WOULD LIKE TO KNOW THE PRODUCT THEY ARE SUPPLYING, AS WE HAVE OBVIOUSLY MADE SOME MISTAKE IN THE SELECTION OF MATERIALS.'

ON MARCH 28, 1963, A CONTRACT IN THE ESTIMATED AMOUNT OF $29,900 WAS AWARDED TO THE MICHLIN CHEMICAL CORPORATION AS THE LOWEST BIDDER COMPLYING WITH THE SPECIFICATIONS. THE DISTRICT ISSUED AN ORDER FOR 10,010 GALLONS UNDER THE CONTRACT ON APRIL 29, 1963. SHORTLY THEREAFTER, WHILE PLACING ORDERS FOR MATERIALS TO PREPARE FOR SHIPMENT OF THE ORDER, MICHLIN DISCOVERED IT HAD MADE AN ERROR IN COMPUTING THE COST ESTIMATE ON WHICH ITS BID WAS BASED. SINCE MICHLIN HAS NOT SUBMITTED WORKSHEETS IN SUPPORT OF ITS REQUEST FOR RELIEF, THE EXACT NATURE OF THE ERROR CANNOT BE SPECIFIED, MORE THAN TO SAY THAT THE ROTENONE COST CONTENT OF THE BID HAD BEEN ESTIMATED ON AN ERRONEOUS BASIS, DUE, ACCORDING TO THE CONTRACTOR TO THE FACT THAT ROTENONE IS PRICED BY A COMPLEX SYSTEM OF POINTS AND FURNISHED IN MANY CONCENTRATIONS FROM 20 PERCENT TO 40 PERCENT. MICHLIN ITSELF STATES IN A LETTER DATED MAY 28, 1963, TO THE PROCUREMENT OFFICE AFFIRMING ITS PRIOR ORAL ALLEGATION OF MISTAKE:

"OUR ERROR WAS NOT IN OUR ABILITY TO FORMULATE BUT RATHER, FRANKLY, IN OUR ABILITY TO COMPUTE A VERY COMPLICATED FORMULATION IN WHICH THE "HUMAN FACTOR OF ERROR OCCURRED.'"

CONTRACTOR HAS SUBMITTED A COST BREAKDOWN, SUPPORTED BY RECENT QUOTES FROM ITS SUPPLIERS, SHOWING THE ACTUAL COST OF MATERIAL FOR THE SPRAY TO BE $3.194 PER GALLON, AND ACTUAL DELIVERED COST, EXCLUSIVE OF PROFIT, TO BE $3.688. CONTRACTOR IS PRESENTLY PERFORMING THE CONTRACT AND HAS MADE DELIVERIES PURSUANT TO ITS TERMS, BUT REQUESTS AN UPWARD ADJUSTMENT OF $0.698 PER GALLON WHICH WOULD BRING ITS PRICE UP TO ITS ACTUAL COSTS OF PERFORMANCE.

THE CONTRACTOR'S BID OF$2.99 PER GALLON WAS LESS THAN TWO-THIRDS OF THE NEXT TWO RESPONSIVE BIDS, WHICH WERE $4.67 AND $4.77 PER GALLON. THE REASONABLE INFERENCE TO BE DRAWN FROM THE FAILURE OF THE LOW BIDDER, DIXIE JANITOR SUPPLY COMPANY, INCORPORATED, TO SUBMIT A SAMPLE WAS THAT ITS BID WAS NOT REALISTIC, AND IT WAS CLEARLY NOT RESPONSIVE.

WHILE THE DIFFERENCE BETWEEN THE MICHLIN BID AND THE NEXT HIGHER RESPONSIVE BIDS MAY NOT HAVE BEEN ENOUGH, STANDING ALONE, TO CHARGE THE CONTRACTING OFFICER WITH NOTICE OF THE PROBABILITY OF ERROR, WHEN THERE IS ADDED TO THE PRICE GAP THE CLEAR WARNING CONTAINED IN THE LETTER OF S. B. PENICK AND COMPANY DATED FEBRUARY 15, 1963, WHICH ARRIVED BEFORE AWARD OF THE CONTRACT, STRONG REASONS FOR RELIEF EMERGE. THE LETTER STATES CATEGORICALLY THAT THE TWO LOWEST BIDDERS HAD TO HAVE INTERPRETED THE SPECIFICATIONS DIFFERENTLY FROM THE HIGHER BIDDERS.

SOMETIME BETWEEN THE RECEIPT OF THE PENICK COMPANY'S LETTER OF FEBRUARY 15 AND AWARD OF THE CONTRACT ON MARCH 28 IT MUST HAVE BECOME OBVIOUS TO THE CONTRACTING OFFICER THAT THE LOW BID OF $2.65 COULD NOT BE SUPPORTED, AND WE FEEL THAT AT THAT POINT IT WOULD HAVE BEEN NO MORE THAN ORDINARY PRUDENCE FOR THE CONTRACTING OFFICER TO HAVE REQUESTED VERIFICATION OF THE MICHLIN BID BEFORE ACCEPTING IT.

THE FACTS IN THIS CASE DIFFER ONLY IN DEGREE FROM THOSE INVOLVED IN C. N. MONROE MANUFACTURING COMPANY V. UNITED STATES, 143 F.SUPP. 449, IN WHICH RELIEF WAS GRANTED TO A CONTRACTOR WHOSE BID, AS WELL AS THAT OF ANOTHER BIDDER, HAD BEEN ERRONEOUSLY COMPUTED ON ONLY A PART OF THE ARTICLES INCLUDED. IN THE OPINION IN THAT CASE THE FOLLOWING STATEMENT APPEARS:

"IT IS WELL KNOWN THAT THE VAST OPERATIONS OF THE GOVERNMENT REQUIRE THE AWARDING OF A TREMENDOUS NUMBER OF CONTRACTS ON COMPETITIVE BIDS, AND AS STATED IN SALIGMAN V. UNITED STATES, D.C., 56 F.SUPP. 505, THE GOVERNMENT SHOULD NOT BE OBLIGED TO ACT AS A NURSEMAID FOR CARELESS BIDDERS. IT IS TRUE THAT IN THIS CASE THE PLAINTIFF MADE AN HONEST BUT CARELESS MISTAKE. THE DEFENDANT DID NOT HAVE ACTUAL KNOWLEDGE OF THE ERROR AND NO INFERENCE OF BAD FAITH EXISTS ON THE PART OF THE GOVERNMENT IN AWARDING THE CONTRACT. HOWEVER, THERE IS JUSTICE IN PLAINTIFF'S COMPLAINT THAT TO HOLD IT TO THE SEVERE CONSEQUENCES OF ITS UNILATERAL MISTAKE WOULD BE HARSH AND INEQUITABLE. IT IS NOT BELIEVED THAT AN HONEST, FAIR-MINDED AND REASONABLE MAN IN GOOD CONSCIENCE WOULD SEEK TO MAINTAIN SUCH A GROSS AND INEQUITABLE ADVANTAGE OF A MISTAKEN BIDDER WHEN AS IN THIS CASE HE HAD REASON TO KNOW OF THE MISTAKE, AND THE GOVERNMENT IS REQUIRED TO MAINTAIN THIS SAME STANDARD OF FAIRNESS WITH THOSE WHO CONTRACT IT. KEMP V. UNITED STATES, D.C., 38 F.SUPP. 568, 570. UNDER ALL THE CIRCUMSTANCES IT MUST BE HELD THAT THE GOVERNMENT SHOULD HAVE KNOWN AT THE TIME IT AWARDED THE CONTRACT THAT A GROSS MISTAKE HAD BEEN MADE BY THE PLAINTIFF AND THEREFORE IT IS INEQUITABLE TO HOLD THE PLAINTIFF TO THE TERMS OF THE CONTRACT.'

ON THE RECORD HERE PRESENTED WE CONCLUDE THAT THE MICHLIN COMPANY SHOULD NOT BE HELD TO BE BOUND BY THE AWARD ON ITS ERRONEOUS BID. SEE 36 COMP. GEN. 641, 644; 37 ID. 707. IT IS THEREFORE OUR VIEW THAT ON THE ORDER WHICH HAS BEEN PLACED PAYMENT MAY BE MADE AT THE RATE OF $3.688 PER GALLON IN ACCORDANCE WITH THE SUPPLIER'S OFFER, AND THAT APPROPRIATE ACTION SHOULD BE TAKEN TO ENTER INTO A PROPER CONTRACT OR CONTRACTS FOR ANY ADDITIONAL REQUIREMENTS FOR THE SPRAY MATERIALS.