B-152670, DEC. 11, 1963

B-152670, DEC. 11, 1963

TO THE ADMINISTRATOR, VETERAN'S AFFAIRS:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 10, 1963, SIGNED BY THE DIRECTOR, SUPPLY MANAGEMENT SERVICE, SUBMITTING THE REQUEST OF PROTO TECH, INCORPORATED, FOR RELIEF FROM BILLS OF COLLECTION RESULTING FROM DEFAULTS IN PERFORMANCE OF PURCHASE ORDERS NOS. 63-HI-30046 AND 63-HI 30083 IN ACCORDANCE WITH FEDERAL PROCUREMENT REGULATION 1-2.406-4I.

PURCHASE ORDER NO. 63-HI-30046 (CONTRACT NO. V7018P-3320B) DATED AUGUST 27, 1962, WAS FOR THE MANUFACTURE AND DELIVERY OF SIXTEEN MOBILE CARTS, (CAPACITY 30) CLINICAL CHART HOLDERS, AND FORTY-EIGHT MEDICATION DISPENSING CARTS. THE CONTRACT WAS LET PURSUANT TO INVITATION FOR BIDS M3 -32-63 ISSUED ON JULY 23, 1962, AND OPENED ON AUGUST 13, 1962. THE ABSTRACT SHOWS BIDS QUOTING THE FOLLOWING UNIT PRICES FOR ITEMS 1-3 (CLINICAL CHART HOLDER CARTS), INCLUSIVE: $164.40 (PROTO-TECH, INCORPORATED); $313, $321.50, $354, AND $380. QUOTATIONS ON ITEMS 4-14 (MEDICATION DISPENSING CARTS), INCLUSIVE, WERE: $96.30 (PROTO-TECH); $219; $235; $245.80; AND $545 (TWO BIDS WERE SLIGHTLY HIGHER ON ITEMS 11-14 DUE AS A DIFFERENT DELIVERY POINT FOR THOSE ITEMS.)

THE FOUR PREVIOUS PURCHASES OF CLINICAL CHART HOLDER CARTS (30 CHARTS) HAD RANGED FROM $330 TO $350. PREVIOUS PURCHASES OF MEDICATION DISPENSING CARTS HAD RANGED FROM $193 TO $230.

SURPRISED TO DISCOVER THAT THE PROTO-TECH UNIT PRICES WERE CONSIDERABLY LESS THAN WHAT THE GOVERNMENT HAD PAID FOR THESE ITEMS IN THE PAST, THAT THE PROTO-TECH UNIT PRICE ON ITEMS 1-3 WAS ONLY ABOUT ONE-HALF OF THE NEXT LOWEST BID, AND THAT THE PROTO-TECH UNIT PRICES ON ITEMS 3-14 WERE EVEN LESS THAN HALF AS LARGE AS THE NEXT LOWEST BID ON THOSE ITEMS, THE CONTRACTING OFFICER SENT THE FOLLOWING TWX TO PROTO-TECH ON AUGUST 14, 1962:

"REURBID ON IFB M3-32-63. CONFIRM UNIT PRICES ALL ITEMS. YOUR PRICES CONSIDERABLY LOWER THAN OTHER BIDDERS OR PREVIOUS PURCHASE PRICES. ERROR SUSPECTED. TELL US IF YOUR ITEMS WILL BE IN STRICT COMPLIANCE WITH VETERANS ADMINISTRATION DESCRIPTION NO. X-550A AND SPECIFICATION NO. 7741340B WITHOUT DEVIATION. REPLY BY WIRE REQUESTED.'

CONTRACTOR REPLIED BOTH BY TELEPHONE AND BY LETTER. A MEMORANDUM FOR THE RECORD PREPARED BY A GOVERNMENT OFFICIAL AT THE TIME RELATES WITH REGARD TO THE FORMER COMMUNICATION THAT THE PROTO-TECH REPRESENTATIVE STATED "THE ONLY THING HE COULD FIND THAT HE HAD LEFT OUT WAS THE $6.10 EACH PACKING CHARGE.' THE MEMORANDUM GOES ON TO STATE:

"* * * TOLD HIM THE PREVIOUS PRICES WE HAD PAID FOR THESE ITEMS AND THE PRESENT BID PRICES. I ASKED HIM IF HE THOROUGHLY UNDERSTOOD THE SPECIFICATIONS AND WOULD FURNISH ITEMS IN FULL COMPLIANCE WITH THE SPECIFICATION REQUIREMENTS. HE SAID HE HAD EXAMINED THESE ITEMS AT THE SOMERVILLE DEPOT, THAT HE HAS MADE SIMILAR ITEMS FOR THE GSA, WAS FAMILIAR WITH OUR SPECIFICATIONS AND WOULD FURNISH ITEMS IN FULL COMPLIANCE WITH SAME. I ASKED HIM IF HE DESIRED TO WITHDRAW HIS BID. HE SAID HE DID NOT WANT TO WITHDRAW BID BUT WANTED IT TO STAND AS SUBMITTED. * * *.'

THE LETTER DATED AUGUST 14, 1962, FROM PROTO-TECH, AND SIGNED BY DANIEL R. CIANCIULLI, VICE-PRESIDENT, READ:

"WE CONFIRM YOUR TELETYPE OF AUGUST 14, 1962 AND OUR TELEPHONE WITH MR. TAYLOR.

"WE CONFIRM OUR PRICES ON THE ABOVE BID:

"CARTS, CLINICAL CHART HOLDER TO: SOMERVILLE, N.J. $164.40 EACH

CART, MEDICATION DISPENSING TO: SOMERVILLE, N.J. 93.30 EACH

HINES, ILLINOIS 97.40 EACH

"WE WILL MANUFACTURE THE ABOVE ITEMS IN STRICT COMPLIANCE TO YOUR SPECIFICATIONS. * * *"

STILL UNEASY ABOUT WHETHER PROTO-TECH UNDERSTOOD THE IMPLICATIONS OF ITS BID, THE CONTRACTING OFFICER SENT THE FOLLOWING TWX TO THE COMPANY:

"REUR BID ON IFB M3-32-63. CLINICAL CHART HOLDER CARTS AND MEDICATION DISPENSING CARTS. DO YOU UNDER-STAND THAT YOU ARE REQUIRED UNDER THE SPECIFICATION TO SUPPLY 30 CHART HOLDERS WITH EACH CLINICAL CHART HOLDER CART? THE COST OF THESE HOLDERS IN PAST HAVE BEEN APPROXIMATELY $2.00 EACH, WHICH WOULD REPRESENT OVER A THIRD OF YOUR BASIC PRICE. WAS THIS $60.00 ADDITIONAL CONSIDERED IN YOUR BID PRICE ESTIMATE? * * *"

CONTRACTOR REPLIED BY LETTER DATED AUGUST 17, 1962, SIGNED BY CHARLES H. THOMPSON, PRESIDENT:

"IN-RE YOUR TELETYPE OF TODAY REGARDING THE FACT THAT THE CHART HOLDERS ARE FURNISHED WITH THE CHART HOLDING CART. WE UNDER STOOD THIS WHEN COMPILING OUR BID ON THIS ITEM. "WE ARE MANUFACTURES (MANUFACTURERS) OF THIS ITEM. AND WE HAVE BEEN MAKING CARTS OF ALL DESCRIPTIONS FOR THE PAST ELEVEN YEARS.

"I PERSONALLY (SIC) EXAMINED THIS CART AT YOUR SUMMERVILLE, (SIC) N.J. DEPOT

"AS YOU DID NOT FURNISH ANY DRAWINGS OR SPECIFICATIONS WITH YOUR BID FORMS. IF WE ARE AWARDED THIS ORDER, WE WOULD APPRECIATE THE SAME. * *

BY LETTER DATED AUGUST 21, 1962, THE VETERAN'S ADMINISTRATION PRODUCT MANAGER, MARKETING DIVISION M3, INFORMED PROTO-TECH AS FOLLOWS:

"WE ARE PROCEEDING WITH PRELIMINARY AWARD ACTION ON ITEMS 1 THRU 14 INCLUSIVE, ON INVITATION M3-32-63, TO YOUR FIRM, HOWEVER MAILING OF ORDER ACCEPTANCE IS WITHHELD UNTIL AUGUST 27, 1962 FOR POSSIBLE REPLY TO THIS LETTER.

"WE FORWARDED SPECIFICATIONS AND DRAWINGS WITH THE INVITATION. IF YOU DID NOT RECEIVE THEM IT IS NOT UNDERSTANDABLE HOW YOU WERE ABLE TO DETERMINE WHETHER YOU COULD COMPLY WITH THE DETAILED REQUIREMENTS.

"AS REQUESTED IN YOUR LETTER DATED AUGUST 17, 1962, ENCLOSED ARE SPECIFICATION NUMBER 7741340B WITH DRAWINGS AND DESCRIPTION NUMBER X 550. DRAWINGS ON DESCRIPTION ARE INCLUDED IN FEDERAL SPECIFICATION GG C-129 WHICH CAN BE OBTAINED FROM GENERAL SERVICES ADMINISTRATION, FSS, 250 HUDSON ST., NEW YORK, N.Y.'

ANOTHER MEMORANDUM TO THE RECORD, DATED AUGUST 24, 1963, AND SIGNED BY THE GOVERNMENT'S PRODUCT MANAGER, STATES:

"MR. THOMPSON OF PROTO-TECH INC. CALLED ON FRI. 8-24-62 RE OUR LETTER DATED 8-21-62. HE REVIEWED SPEC 7741340B AND INSISTED THERE WOULD BE NO PROBLEM IN MEETING SPEC. OR DELIVERY REQUIRED. HE HAD NOT RECEIVED FED.SPEC. GG-C-129 FROM GSA, BUT DID FEEL HE COULD ALSO MANUFACTURE AS REQUIRED BASED ON VISUAL INSPECTION OF CARTS * * *.'

"I TOLD HIM THAT WE ARE PROCEEDING WITH AWARD AND MAILING OF ORDER ON MONDAY, UNLESS HE NOTIFIES US BY CLOSE OF BUSINESS ON MONDAY 8-27, HE COULD NOT MEET SPEC OR DELIVERY. * * *"

NOT HEARING FURTHER FROM THE COMPANY, THE GOVERNMENT ISSUED PURCHASE ORDER NO. 63-HI-30046 TO PROTO-TECH ON AUGUST 27, 1962, IN THE TOTAL AMOUNT OF $7,279.20, FOR ITEMS 1-14, INCLUSIVE.

ON AUGUST 30, 1962, THE GOVERNMENT ISSUED INVITATION FOR BIDS NO. M3-40- 63, ITEMS 1-4 OF WHICH CALLED FOR THE MANUFACTURE AND DELIVERY OF MOBILE CLINICAL CHART HOLDER (45 CHART HOLDERS) CARTS. THE BIDS WERE OPENED ON SEPTEMBER 19, 1962, AND THE UNIT PRICES WERE AS FOLLOWS: $297.95 (PROTO- TECH, INC.); $399; $442; $450. THE ITEM HAD PREVIOUSLY BEEN PURCHASED AT UNIT PRICES RANGING FROM $343 TO $398.

BY TWX DATED SEPTEMBER 20, 1962, THE PROCUREMENT AGENT REQUESTED CONFIRMATION OF THE UNIT PRICE "BASED ON COMPLETE COMPLIANCE WITH V.A. DESCRIPTION NO. X-550A, AS YOUR PRICE IS CONSIDERABLY LOWER THAN OTHER PRICES QUOTED.' CONTRACTOR GAVE CONFIRMATION BY TELEFAX DATED SEPTEMBER 21, 1963. ACCORDINGLY, CONTRACT NO. V7018P-3347B WAS AWARDED TO PROTO- TECH, INCORPORATED, ON OCTOBER 1, 1962, AND PURCHASE ORDER NO. 63-HI-30083 WAS DISPATCHED TO THE CONTRACTOR.

BY LETTER DATED OCTOBER 25, 1962, CONTRACTOR ASKED FOR A 15-DAY EXTENSION OF THE DELIVERY DATE FOR THE FIRST DELIVERY UNDER THE ORIGINAL PURCHASE ORDER, WHICH REQUEST WAS GRANTED BY V.A. LETTER DATED OCTOBER 30, 1962.

WHEN CONTRACTOR PASSED OVER THE INITIAL DELIVERY DATES OF BOTH PURCHASE ORDERS WITHOUT MAKING DELIVERY, AND AFTER SEVERAL FRUITLESS ATTEMPTS TO ASCERTAIN THE STATUS OF PERFORMANCE, THE CONTRACTS WERE TERMINATED FOR DEFAULT BY LETTER DATED DECEMBER 12, 1962, AS TO THE FIRST PURCHASE ORDER, AND BY LETTER DATED JANUARY 8, 1963, AS TO THE SECOND. THE VARIOUS ITEMS WERE REPROCURED FROM OTHER SOURCES AND BILLS OF COLLECTION, REPRESENTING THE EXCESS COSTS OF REPROCUREMENT, TOTALLING $8,092.47, WITH RESPECT TO THE PRIOR CONTRACT, AND $1,808.37, WITH RESPECT TO THE LATER CONTRACT, WERE SENT TO CONTRACTOR.

CONTRACTOR, BY LETTER DATED JUNE 3, 1963, FOR THE FIRST TIME ALLEGED THAT AN ERROR HAD BEEN MADE IN THE COMPUTATION OF ITS BID IN THAT IT HAD BEEN PREDICATED UPON THE USE OF STEEL INSTEAD OF STAINLESS STEEL AS REQUIRED BY THE SPECIFICATIONS. CONTRACTOR ASSERTED THAT THE CONTRACT PRICES DID NOT EVEN COVER THE COST OF MATERIALS AND THAT THE CONTRACTING OFFICER SHOULD HAVE KNOWN PERFORMANCE AT SUCH RIDICULOUSLY LOW PRICES WOULD BE IMPOSSIBLE. IN CONTRACTOR'S OWN WORDS:

"* * * THE VETERANS ADMINISTRATION HAS NOT BEEN ABLE TO PURCHASE THESE ITEMS IN THE PAST TEN YEARS FOR DOUBLE THE AMOUNT OF OUR BID PRICES.'

A LATER SUBMITTAL BY THE COMPANY PRESENTS A COMPARISON OF THE COST OF PERFORMANCE USING ORDINARY STEEL WITH THE COST OF PERFORMANCE USING STAINLESS STEEL. SPECIAL TOOLS, DIES, AND SHEARS WOULD HAVE HAD TO HAVE BEEN PURCHASED TO ENABLE CONTRACTOR TO FABRICATE THE STAINLESS STEEL. THE RELATIVE COSTS OF THE ITEMS MANUFACTURED FROM STEEL VERSUS FROM STAINLESS STEEL WERE ESTIMATED AS FOLLOWS: (PO 63-HI-30046) CARTS, CLINICAL CHART HOLDER, 30 CHARTS--- $66.40 PER UNIT, STEEL (CONTRACTOR'S ORIGINAL WORKSHEETS ESTIMATED THE COST OF THIS ITEM AT $131-83), $181.90 PER UNIT, STAINLESS STEEL; CARTS, MEDICATION DISPENSING--- $53.90 PER UNIT, STEEL (CONTRACTOR'S WORKSHEET ESTIMATE-- $76.80), $157.40 PER UNIT STAINLESS STEEL; (PO 63-HI-30083) CARTS, CLINICAL CHART HOLDER, 45 CHARTS--- $92.70 PER UNIT STEEL (CONTRACTOR'S WORKSHEET ESTIMATE--- $173.65), $222.20 PER UNIT STAINLESS STEEL. THE DIFFERENCE IN COST OF MANUFACTURING ALL UNITS CALLED FOR BY BOTH PURCHASE ORDERS WAS ESTIMATED TO BE $8,111.00.

PROTO-TECH, INCORPORATED, HAS ASKED TO BE RELIEVED FROM THE CONSEQUENCES OF THE NEGLIGENT PREPARATION OF ITS BIDS ON THE AFOREMENTIONED CONTRACTS. THE CONTRACTING OFFICER, ALERTED BOTH BY PAST EXPERIENCE IN PROCURING THESE ITEMS AND BY THE RANGE OF THE BIDS, BENT EVERY EFFORT TO PROTECT THE COMPANY AGAINST ITS OWN IMPRUDENCE. WITH RESPECT TO THE EARLIER CONTRACT, VERIFICATION OF THE IMPROVIDENT BID WAS ASKED FOR SEVERAL TIMES BEFORE AWARD WAS FINALLY MADE. WITH RESPECT TO THE LATER CONTRACT IT WAS REQUESTED AT LEAST ONCE BEFORE AWARD. THESE WERE NEITHER PERFUNCTORY NOR EVASIVE REQUESTS. NO INFORMATION KNOWN TO THE GOVERNMENT WAS WITHHELD FROM THE COMPANY AT THE TIME OF VERIFICATION. COMPARE UNITED STATES V. METRO NOVELTY MANUFACTURING COMPANY, 125 F.SUPP. 713; 36 COMP. GEN. 27; 35 COMP. GEN. 136; 37 COMP. GEN. 786; B-128471 DATED JULY 30, 1956; B- 137494 DATED OCTOBER 23, 1958. NONETHELESS UNEQUIVOCAL CONFIRMATION WAS FORTHCOMING EACH TIME VERIFICATION WAS REQUESTED.

THE MISCONCEPTION THAT THE HOSPITAL CARTS WERE TO BE MADE OF ORDINARY STEEL CONSTITUTED A UNILATERAL MISTAKE ON THE BIDDER'S PART WHICH WAS NEITHER KNOWN TO NOR IN ANY WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. BIDDER EITHER RECEIVED COPIES OF ALL PERTINENT SPECIFICATIONS AND DRAWINGS BEFORE AWARD OR WAS REFERRED TO A CONVENIENT SOURCE OF SUCH SPECIFICATIONS.

UNDER THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THE CONTRACTING OFFICER ACTED IN BAD FAITH OR TOOK UNCONSCIONABLE ADVANTAGE OF THE COMPANY BY LETTING THE CONTRACTS. THE CONTRACTING OFFICER COULD NOT BE EXPECTED TO SUGGEST THE EXACT NATURE OR SOURCE OF MISTAKE, A FACT WHICH WAS UNKNOWN TO HIM WHEN HE REQUESTED VERIFICATION. B-130984 DATED MAY 2, 1957. THE QUOTATION OF AN UNUSUALLY LOW PRICE IS CAUSE FOR SUSPICION OF ERROR, BUT REPEATED CONFIRMATION WILL DISPEL ANY DOUBTS A REASONABLE MAN MIGHT ENTERTAIN AND CAUSE SUSPICION TO YIELD TO PLAUSIBLE EXPLANATION. ANY NUMBER OF SUCH EXPLANATIONS ARE POSSIBLE: A BREAK-THROUGH IN THE STATE OF THE ART; BUSINESS EXIGENCY CAUSING THE BIDDER TO DELIBERATELY INCUR A LOSS; A FORTUITOUS CIRCUMSTANCE SUCH AS THAT THE BIDDER BENEFITTED FROM THE LIQUIDATION OF A COMPETITOR'S INVENTORY AT DISTRESS PRICES.

THE PRIMARY QUESTION IN THIS CASE IS NOT WHETHER THE COMPANY MADE MISTAKES IN ITS BIDS, AS ALLEGED, BUT RATHER WHETHER VALID AND SUBSISTING CONTRACTS WERE CONSUMMATED BY THE ACCEPTANCE OF THE BIDS. THE RESPONSIBILITY FOR THE PREPARATION OF A BID SUBMITTED IN RESPONSE TO AN INVITATION IS UPON THE BIDDER. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 CT.CLS. 120, 163, WHERE THE COURT OBSERVED:

"* * * THE PARTIES ARE DEALING AT ARMS LENGTH AND BIDDERS ARE PRESUMED TO BE QUALIFIED TO ESTIMATE THE PRICE AT WHICH THEY CAN PERFORM THE WORK SPECIFIED AT A REASONABLE PROFIT. * * *"

WITH RESPECT TO THE COMPANY'S STATEMENT THAT IT WOULD BE UNFAIR FOR THE GOVERNMENT TO TAKE ADVANTAGE OF THE ERROR, IT MAY BE SAID THAT AFTER REPEATED VERIFICATIONS AND CONFIRMATIONS OF THE FIRST BID, BY TELEPHONE, TELEGRAM, AND LETTER, THE CONTRACTING OFFICER WAS NOT ONLY JUSTIFIED IN AWARDING THE CONTRACT TO PROTO-TECH ON THE BASIS THAT ITS BID WAS THE LOWEST RECEIVED, BUT HE WOULD HAVE BEEN REMISS IN THE PERFORMANCE OF HIS DUTY HAD HE DONE OTHERWISE. SEE CARNEGIE STEEL COMPANY V. CONNALLY, 89 N.J.L. 1, 97 A. 774; SHRIMPTON MFG. COMPANY V. BRIN, 59 TEX.CIV.APP. 352, 125 S.W. 942; AND ALABAMA SHIRT AND TROUSER COMPANY V. UNITED STATES, 121 CT.CLS. 313. UPON ACCEPTANCE OF THE BIDS, THE RIGHT VESTED IN THE GOVERNMENT TO RECEIVE PERFORMANCE STRICTLY IN ACCORDANCE WITH THEIR TERMS, AND, IN THE ABSENCE OF A STATUTE SPECIFICALLY SO PROVIDING, NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY OR SURRENDER THAT RIGHT WITHOUT ADEQUATE CONSIDERATION. SIMPSON V. UNITED STATES, 172 U.S. 372; UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 CT.CLS. 327, 335; AND BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 ID. 584, 607.

WE ARE CONSTRAINED TO SAY THAT THE BILLS OF COLLECTION REPRESENT VALID INDEBTEDNESS OF THE COMPANY TO THE UNITED STATES GOVERNMENT WHICH MUST BE ENFORCED UNTIL SATISFIED. COMPARE 36 COMP. GEN. 27; 37 COMP. GEN. 786. ANY OTHER RESULT WOULD ENCOURAGE IRRESPONSIBLE BIDDING ON GOVERNMENT CONTRACTS AND IGNORE THE DOCTRINE OF LACHES.