B-153017, MAY 27, 1964

B-153017: May 27, 1964

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TO THE SECRETARY OF THE INTERIOR: REFERENCE IS MADE TO LETTERS DATED DECEMBER 4. WAS DIVIDED INTO TWO SCHEDULES. EACH BIDDER WAS REQUIRED TO WARRANT THE EXTENT OF HIS OFFERED TRANSFORMER'S PERFORMANCE CHARACTERISTICS. SUBPARAGRAPH B 5A (5) OF THE INVITATION'S "SPECIAL REQUIREMENTS" PROVIDED THAT IN THE COMPARISON OF BIDS CONSIDERATION WAS TO BE GIVEN TO WARRANTED NO-LOAD. THE EVALUATION FOR EFFICIENCY AT ONE-TENTH OF ONE KILOWATT FOR THOSE WARRANTIES WAS COMPUTED AS $982. THIS AMOUNT WAS ESTABLISHED AS THE ZERO FIGURE IN THE EFFICIENCY EVALUATION DIFFERENTIAL FOR COMPARISON IN THE BID OF THE PENNSYLVANIA TRANSFORMER DIVISION. A PREVIOUSLY UNDETECTED CLERICAL ERROR WAS NOTED IN THE WARRANTED CHARACTERISTICS SHOWN ON PAGE "L" OF THE SUBJECT INVITATION.

B-153017, MAY 27, 1964

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTERS DATED DECEMBER 4, 1963, AND MAY 7, 1964, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING A DECISION AS TO WHETHER CONTRACT NO. 14-06-D-4432 WITH THE PENNSYLVANIA TRANSFORMER DIVISION, MCGRAW-EDISON COMPANY, SHOULD BE MODIFIED BY REASON OF AN ERROR ALLEGED SUBSEQUENT TO AWARD.

INVITATION NO. DS-5780, ISSUED BY THE BUREAU OF RECLAMATION, DENVER, COLORADO, IN CONNECTION WITH THE FURNISHING OF POWER TRANSFORMERS FOR THE GLEN CANYON POWERPLANT, GLEN CANYON UNIT, ARIZONA-UTAH, MIDDLE RIVER DIVISION, COLORADO RIVER STORAGE PROJECT, WAS DIVIDED INTO TWO SCHEDULES, SCHEDULE NO. 1 WHICH CALLED FOR BIDS ON 9 345-KILOVOLT POWER TRANSFORMERS AND SCHEDULE NO. 2 WHICH CALLED FOR 9 345-KILOVOLT POWER TRANSFORMERS. EACH BIDDER WAS REQUIRED TO WARRANT THE EXTENT OF HIS OFFERED TRANSFORMER'S PERFORMANCE CHARACTERISTICS, AND SUBPARAGRAPH B 5A (5) OF THE INVITATION'S "SPECIAL REQUIREMENTS" PROVIDED THAT IN THE COMPARISON OF BIDS CONSIDERATION WAS TO BE GIVEN TO WARRANTED NO-LOAD, LOAD, AND TOTAL LOAD LOSSES AT SPECIFIED RATES FOR EACH ONE-TENTH OF ONE KILOWATT FOR EACH TRANSFORMER AND THAT THE AGGREGATE AMOUNT WOULD BE ADDED TO THE RESPECTIVE LUMP-SUM PRICES BID FOR ITEMS 1 (SCHEDULE NO. 1) AND 2 (SCHEDULE NO. 2). ALSO, SUBPARAGRAPH B-15B OF THE "SPECIAL REQUIREMENTS" PROVIDED FOR A PRO- TANTO REDUCTION FROM THE CONTRACT PRICE OF THE MONETARY VALUE FOR THE ACTUAL LOSSES OF EACH POWER TRANSFORMER ON THE SAME BASIS AS DESCRIBED IN PARAGRAPH B-5 FOR THE WARRANTED LOSSES.

PURSUANT TO THE REQUIREMENTS, THE PENNSYLVANIA TRANSFORMER DIVISION WARRANTED THE PERFORMANCE OF EACH POWER TRANSFORMER TO BE DELIVERED UNDER SCHEDULE NO. 1 WITH LOSSES, INCLUDING POWER REQUIREMENTS FOR TWO OIL- CIRCULATING PUMPS, AS 98/289 (98 NO-LOAD LOSSES, 289 TOTAL LOSSES AT 83,333 KILOVOLTS). THE EVALUATION FOR EFFICIENCY AT ONE-TENTH OF ONE KILOWATT FOR THOSE WARRANTIES WAS COMPUTED AS $982,260, AND THIS AMOUNT WAS ESTABLISHED AS THE ZERO FIGURE IN THE EFFICIENCY EVALUATION DIFFERENTIAL FOR COMPARISON IN THE BID OF THE PENNSYLVANIA TRANSFORMER DIVISION, THE SECOND LOWEST BIDDER'S DIFFERENTIAL UNDER THIS SCHEDULE FOR THIS ITEM BEING $106,560, AND THE THIRD LOWEST BIDDER'S DIFFERENTIAL BEING $48,798.

BY LETTER OF JULY 24, 1962, THE PENNSYLVANIA TRANSFORMER DIVISION ACKNOWLEDGED RECEIPT OF THE BUREAU'S AWARD LETTER OF JULY 18, 1962, FORWARDED EXECUTED PERFORMANCE BOND IN DUPLICATE, AND COMMENTED THAT IT HAD TAKEN NOTE OF INSPECTION REQUIREMENTS AS WELL AS CONDITIONS AND REGULATIONS OF CERTAIN GOVERNING LAWS. HOWEVER, IN A LETTER OF NOVEMBER 26, 1962, THAT CONCERN ADVISED THE BUREAU, AMONG OTHER THINGS, AS FOLLOWS:

"DURING OUR OVERALL EXAMINATION OF THE SUBJECT ORDER JUST PRIOR TO THE KEY DRAWING CONFERENCE HELD ON NOVEMBER 16, 1962 IN DENVER, A PREVIOUSLY UNDETECTED CLERICAL ERROR WAS NOTED IN THE WARRANTED CHARACTERISTICS SHOWN ON PAGE "L" OF THE SUBJECT INVITATION. THE TWO COLUMNS OF FIGURES WERE INADVERTENTLY REVERSED. THE FIGURES SHOWN FOR SCHEDULE 1 ARE ACTUALLY FOR SCHEDULE 2 AND THE FIGURES SHOWN FOR SCHEDULE 2 ARE ACTUALLY FOR SCHEDULE 1.

"BASED ON OUR ANALYSIS OF THE BID ABSTRACT, IT APPEARS THAT WE WOULD HAVE BEEN LOW BIDDER OF SCHEDULE 1 WITH OUR CORRECT LOSSES WARRANTED. IN FACT, HAD OUR ERROR NOT OCCURRED, WE WOULD HAVE BEEN THE LOW BIDDER FOR BOTH SCHEDULE 1 AND SCHEDULE 2 AND THE COMBINATION OF SCHEDULE 1 AND SCHEDULE 2. WE ARE NOT ASKING FOR A CHANGE IN THE AWARD OF SCHEDULE 2, WE ARE ONLY REQUESTING THAT OUR WARRANTED CHARACTERISTICS FOR SCHEDULE 1 AS SHOWN ON PAGE "L" OF THE SUBJECT INVITATION BE CHANGED TO NO LOAD LOSSES EQUALS 102 KW AND TOTAL LOSSES EQUALS 331 KW.'

IN RESPONSE TO THE BUREAU'S REQUEST, THE PENNSYLVANIA TRANSFORMER DIVISION ON JANUARY 30, 1963, FURNISHED CERTAIN DOCUMENTARY EVIDENCE, INCLUDING THE ORIGINAL PRELIMINARY DESIGN WORKSHEETS FROM WHICH THE WARRANTED LOSSES WERE COMPUTED, TO SUPPORT ITS REQUEST FOR THE CHANGE IN THE CONTRACT TERMS.

THE BID EVALUATION FOR EFFICIENCY FOR COMPARISON, BASED ON THE ORIGINAL NO-LOAD AND TOTAL LOAD LOSSES WARRANTED BY THE PENNSYLVANIA TRANSFORMER DIVISION, WAS $982,260, AND IF ITS ALLEGATIONS ARE CONSIDERED AS ACCEPTABLE AND CORRECTION AUTHORIZED UNDER THE CIRCUMSTANCES THAT EVALUATION FOR EFFICIENCY FOR COMPARISON WOULD BE INCREASED TO $1,109,340. EVEN WITH THE INCLUSION OF SUCH INCREASED EVALUATION IN ITS AGGREGATE BID AMOUNT FOR COMPARISON, THE PENNSYLVANIA TRANSFORMER DIVISION'S EVALUATED PRICE WOULD STILL BE LOW. THE NET EFFECT OF THE CORRECTION WOULD BE THE REDUCTION BY $127,080 FROM ANY AMOUNT REQUIRED TO BE DEDUCTED UNDER SUBPARAGRAPH B 15B MENTIONED ABOVE.

IN RESPONSE TO A REQUEST FOR A FURTHER REPORT AS TO WHETHER, UNDER THE FACTS AND CIRCUMSTANCES DISCLOSED BY THE BIDS, THE CONTRACTING OFFICE SHOULD HAVE BEEN ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF AN ERROR IN THE BID AS TO THE WARRANTED LOSSES, THE ACTING CHIEF ENGINEER OF THE BUREAU OF RECLAMATION ADVISES:

"DURING REVIEW OF BIDS AND BEFORE AWARD OF CONTRACT, THE VARIANCE WAS NOTED AND CONSIDERED BETWEEN WARRANTED NO-LOAD LOSSES INDICATED IN THE BIDDING SCHEDULE OF MCGRAW-EDISON UNDER INVITATION NO. DS-5780 AND THE NO- LOAD LOSSES APPEARING IN THAT BIDDER'S PROPOSAL P-43582 SUBMITTED WITH THE BID. ALSO THE UNUSUALLY LOW VALUES OF TOTAL LOSSES WARRANTED UNDER SCHEDULE NO. 1 WERE CONSIDERED BY THIS OFFICE AT THAT TIME. HOWEVER, THE NINE TRANSFORMERS UNDER SCHEDULE NO. 1 OF INVITATION NO. DS-5780 WERE THE FIRST 345-KILOVOLT POWER TRANSFORMERS EVER PURCHASED BY THE BUREAU OF RECLAMATION, AND THE INVITATION PERMITTED OPTIONS WITH RESPECT TO TEMPERATURE RISE WHICH COULD VARY WITH THE TYPE OF INSULATION OFFERED. EFFICIENCIES ARE DEPENDENT UPON THE DESIGN CHARACTERISTICS PECULIAR TO THE BIDDERS' MANUFACTURING PRACTICES, AND BECAUSE OF THE OPTIONS PERMITTED BY THE INVITATION, IT WAS DETERMINED AT THE TIME OF BID REVIEW THAT THIS OFFICE WAS NOT NECESSARILY ON NOTICE OF PROBABLE ERROR. ALSO CONSIDERED IN REACHING THE DECISION NOT TO SEEK CONFIRMATION OF THE LOSSES STATED BY MCRAW EDISON IS THE FACT THAT ON SOME OCCASIONS, WE HAVE NOTED THAT BIDDERS HAVE STATED EFFICIENCIES HIGHER THAN WE EXPECTED.

"ADMITTEDLY THIS WAS SOMEWHAT OF A BORDERLINE CASE, AND I NOW HAVE NO DOUBT THAT A BONA FIDE MISTAKE WAS MADE BY MCRAW-EDISON. ALTHOUGH THERE NEED BE NO DIRECT RELATIONSHIP BETWEEN INFORMATIONAL DATA (SUCH AS THAT FURNISHED BY MCRAW-EDISON IN ITS PROPOSAL P-43582) AND THE LOSSES WHICH A BIDDER ACTUALLY WARRANTS, IT APPEARS THAT ON A "STRAIGHT LINE BASIS" SUCH AS MENTIONED IN THE INQUIRY FROM GAO, COMPARISON OF LOSSES AT THE DIFFERENT VOLTAGES WOULD INDICATE POSSIBLE ERROR IN THE MCGRAW-EDISON BID.'

THE ABSTRACT OF BIDS DISCLOSES THAT THE NUMERICAL FIGURE REPRESENTING THE TOTAL LOSSES IN KILOWATTS UTILIZED IN THE COMPUTATION OF THE EVALUATION FOR EFFICIENCY OF THE 230-KILOVOLT TRANSFORMERS LISTED FOR EACH OF THE SIX OTHER BIDDERS IN SCHEDULE NO. 2 WAS LESS THAN THAT SHOWN FOR THE LARGER 345-KILOVOLT TRANSFORMERS LISTED IN SCHEDULE NO. 1, WHEREAS THE FIGURE ( 102/331 ( SHOWN FOR THE PENNSYLVANIA TRANSFORMER DIVISION ON THIS ITEM FOR THE 230-KILOVOLT TRANSFORMERS WAS GREATER THAN THE FIGURE 98/289 SHOWN FOR THE 345 KILOVOLT TRANSFORMERS. THEREFORE IT SHOULD HAVE BEEN REASONABLY APPARENT THAT UNDER NORMAL CIRCUMSTANCES THE TOTAL LOSSES OF A 230 KILOVOLT TRANSFORMER IS LESS THAN THAT OF A 345-KILOVOLT TRANSFORMER, AND IN VIEW OF A POSSIBLE DISCREPANCY IN THE FIGURES SUBMITTED BY THE PENNSYLVANIA TRANSFORMER DIVISION A MORE DETAILED ANALYSIS SHOULD HAVE BEEN MADE OF THOSE FIGURES IN DETERMINING THE EFFICIENCY EVALUATION DIFFERENTIAL FOR COMPARISON. IN ADDITION, THE PERFORMANCE SHEETS CONTAINED IN PROPOSAL NO. P-43582, SUBMITTED BY THE PENNSYLVANIA TRANSFORMER DIVISION PRIOR TO THE AWARD, NOT ONLY DISCLOSED THAT ITS MANUFACTURED 230-KILOVOLT TRANSFORMER HAD A LOWER TOTAL LOSS THAN ITS MANUFACTURED 345 KILOVOLT TRANSFORMER BUT LISTED THE TOTAL LOSS OF SUCH 345-KILOVOLT TRANSFORMER AT 100,000KILOVOLTS AS 420 KILOWATTS AND, CONSEQUENTLY, IT COULD HAVE BEEN ASCERTAINED THAT AT 83,333 KILOVOLTS THE TOTAL LOAD LOSS WOULD HAVE APPROXIMATED 350 KILOWATTS ( 5/6 OF 420 KILOWATTS), A FIGURE CLOSE TO 331 KILOWATTS, AS FURNISHED, BUT NOT AT AN ABNORMALLY LOW FIGURE OF 289 KILOWATTS.

ON THE BASIS OF THE FACTS AND EVIDENCE OF RECORD, WE BELIEVE THAT THE PENNSYLVANIA TRANSFORMER DIVISION MADE A BONA FIDE ERROR IN TRANSPOSING THE FIGURES FOR THE EVALUATION OF EFFICIENCY OF THE TRANSFORMERS CALLED FOR IN SCHEDULES NOS. 1 AND 2. WE ALSO BELIEVE THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF SUCH ERROR AND SHOULD NOT HAVE ACCEPTED THE BID OF THAT CONCERN WITHOUT REQUESTING A VERIFICATION OF THE SUBMITTED FIGURES. ACCORDINGLY, CONTRACT NO. 14-06-D- 4432 WITH THE PENNSYLVANIA TRANSFORMER DIVISION SHOULD BE MODIFIED TO REFLECT THE WARRANTED NO LOAD LOSSES AND TOTAL LOSSES OF THE TRANSFORMERS AS 102/331 KILOWATTS. SEE 37 COMP. GEN. 654.

IN HIS MEMORANDUM OF OCTOBER 31, 1963, THE CHIEF ENGINEER QUESTIONED WHETHER THE TOTAL LOSS EVALUATION SHOULD BE LIMITED TO $1,031,058 (THE AMOUNT SHOWN IN THE ABSTRACT OF BIDS IN CONNECTION WITH THE FIGURES FURNISHED BY THE GENERAL ELECTRIC COMPANY AND CONSTITUTING THE SECOND LOWEST EVALUATION FOR EFFICIENCY). THE CONTRACT WAS AWARDED ON THE BASIS OF THE AMOUNT FOR COMPARISON--- THE ITEM OF EVALUATION FOR EFFICIENCY DIFFERENTIAL BEING MERELY FOR COMPARISON PURPOSES AND ONLY THE DIFFERENTIAL BEING INCLUDED IN THE AMOUNT FOR COMPARISON--- WHICH HAS BEEN REESTABLISHED IN A FIGURE LOWER THAN THAT REESTABLISHED FOR THE SECOND LOWEST BIDDER, AS HEREINBEFORE INDICATED. THERE APPEARS, THEREFORE, TO BE NO LEGAL AUTHORITY TO REESTABLISH THE EVALUATION FOR EFFICIENCY IN AN AMOUNT LESS THAN $1,109,340 (THE EFFICIENCY EVALUATION OF THE LOW BID AT THE SPECIFIED RATES OF ONE-TENTH OF ONE KILOWATT ON NO-LOAD AND TOTAL LOSSES OF 102/331 KILOWATTS). FUTHERMORE, WHILE AS REPORTED BY THE ACTING CHIEF ENGINEER, HAD THE ERROR NOT OCCURRED BOTH SCHEDULES WOULD HAVE BEEN AWARDED TO PENNSYLVANIA TRANSFORMER DIVISION AND THE TOTAL COST WOULD HAVE BEEN $3,401.88 LESS THAN THE TOTAL OF THE INDIVIDUAL AWARDS TO PENNSYLVANIA TRANSFORMER DIVISION AND WESTINGHOUSE ELECTRIC CORPORATION FOR SCHEDULES NOS. 1 AND 2, RESPECTIVELY, THERE IS NO LEGAL BASIS FOR DEDUCTING THAT AMOUNT FROM THE CONTRACT WITH PENNSYLVANIA TRANSFORMER DIVISION FOR SCHEDULE NO. 1. UNDOUBTEDLY HAD VERIFICATION BEEN REQUESTED, THE WARRANTED NO-LOAD LOSSES WOULD HAVE BEEN REVERSED. HOWEVER, THIS WAS NOT DONE AND PENNSYLVANIA TRANSFORMER DIVISION MAY NOT NOW BE CHARGED FOR THE EXTRA COST, WHICH MIGHT HAVE BEEN SAVED, IN CONNECTION WITH THE CONTRACT ON SCHEDULE NO. 2 AWARDED TO WESTINGHOUSE ELECTRIC CORPORATION.

A REFERENCE TO THIS DECISION SHOULD BE MADE UPON MODIFICATION OF THE CONTRACT.

THE DOCUMENTS SUBMITTED WITH THE LETTER OF DECEMBER 4, 1963, ARE RETURNED, AS REQUESTED.