B-153337, JUN. 9, 1964

B-153337: Jun 9, 1964

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WE HAVE BEEN FURNISHED A REPORT CONCERNING THE REQUEST OF TRIPLE "A" MACHINE SHOP. ITEM 701 PROVIDED THAT THE CONTRACTOR WAS TO FURNISH EIGHT NEW BABCOCK AND WILCOX ECONOMIZER ELEMENTS. BIDS WERE OPENED ON NOVEMBER 26. 346 AWARD WAS MADE TO TRIPLE "A" ON NOVEMBER 27. TRIPLE "A" CONTENDS THAT IT IS ENTITLED TO AN UPWARD ADJUSTMENT IN PRICE SINCE THE CONTRACTING OFFICER ALLEGEDLY HAD ACTUAL NOTICE OF A MISTAKE IN ITS BID PRIOR TO AWARD. 636.00 SO THAT THE CORRECT PRICE WILL NOT EXCEED THE NEXT LOWEST BID. CONTENDS THAT NOTIFICATION OF AWARD WAS IN FACT MAILED PRIOR TO RECEIPT OF THIS INFORMATION. NO RECORD OF TIME LETTER ACTUALLY WAS MAILED IS AVAILABLE. NORMAL MAIL PICKUP HOURS ARE 7:30 A.M.

B-153337, JUN. 9, 1964

TO THE SECRETARY OF THE NAVY:

UNDER CORRESPONDENCE DATED MAY 1, 1964, FROM THE DIRECTOR OF CONTRACTS, BUREAU OF SHIPS, REFERENCE NOBS-41513, SER 161-110, WE HAVE BEEN FURNISHED A REPORT CONCERNING THE REQUEST OF TRIPLE "A" MACHINE SHOP, INCORPORATED, FOR RELIEF FROM AN ALLEGED ERROR IN BID.

BY INVITATION NO. 1110-62 (JOB ORDER NO. 951) DATED NOVEMBER 20, 1962, THE INDUSTRIAL MANAGER, TWELFTH NAVAL DISTRICT, SAN FRANCISCO NAVAL SHIPYARD, SAN FRANCISCO, CALIFORNIA, INVITED BIDS FOR REPAIRS TO THE USS ZELIMA (AF 49). SPECIFICATIONS ATTACHED THERETO CALLED FOR COMPLETION OF TWO ITEMS OF WORK: ITEM NO. 700 REQUIRED REMOVAL OF THE ELECTRIC MAIN FEED PUMP AND ASSOCIATED EQUIPMENT, AND THE INSTALLATION OF A NEW GOVERNMENT- FURNISHED PUMP; ITEM 701 PROVIDED THAT THE CONTRACTOR WAS TO FURNISH EIGHT NEW BABCOCK AND WILCOX ECONOMIZER ELEMENTS.

AS PROVIDED IN THE INVITATION, BIDS WERE OPENED ON NOVEMBER 26, 1962. COPY OF THE BID ABSTRACT SHOWS THE FOLLOWING BIDS RECEIVED:

CHART

FRANKLIN MACHINE WORKS, INC. $22,500

PACIFIC SHIP REPAIR, INC. 19,620

TODD SHIPYARDS CORPORATION 19,790

TRIPLE "A" MACHINE SHOP, INC. 12,984

WILLAMETTE IRON AND STEEL COMPANY 22,346

AWARD WAS MADE TO TRIPLE "A" ON NOVEMBER 27, 1962, WITHOUT ANY REQUEST FOR VERIFICATION OF THE LOW BID.

TRIPLE "A" CONTENDS THAT IT IS ENTITLED TO AN UPWARD ADJUSTMENT IN PRICE SINCE THE CONTRACTING OFFICER ALLEGEDLY HAD ACTUAL NOTICE OF A MISTAKE IN ITS BID PRIOR TO AWARD. IT SHOULD BE NOTED THAT WHILE THE EVIDENCE SHOWS THAT TRIPLE "A" HAD UNDERSTATED ITS BID BY $8,783.46, CLAIMANT ASKS THAT ITS CONTRACT BE INCREASED BY $6,636.00 SO THAT THE CORRECT PRICE WILL NOT EXCEED THE NEXT LOWEST BID. BY AFFIDAVIT, MR. CLIFFORD P. LEGETTE, CHIEF ESTIMATOR OF TRIPLE "A," STATES THAT HE TELEPHONED THE CONTRACTING OFFICER ON NOVEMBER 27, 1962 AT 11:00 A.M. AND NOTIFIED HIM THAT TRIPLE "A" HAD ERRED IN ITS BID. THE CONTRACTING OFFICER, HOWEVER, CONTENDS THAT NOTIFICATION OF AWARD WAS IN FACT MAILED PRIOR TO RECEIPT OF THIS INFORMATION. IN HIS SWORN AFFIDAVIT MR. JOHN J. RAULY, AN OFFICER IN THE INDUSTRIAL MANAGER'S OFFICE STATES:

" . . . NO RECORD OF TIME LETTER ACTUALLY WAS MAILED IS AVAILABLE; HOWEVER, NORMAL MAIL PICKUP HOURS ARE 7:30 A.M., 9:00 A.M., 12:00 NOON, AND 3:00 P.M., AND IT IS PRESUMED THAT THE LETTER LEFT THE SHIPYARD IN THE MORNING HOURS.

"A TELEPHONE CALL WAS RECEIVED FROM MR. C. P. LEGETTE, OF TRIPLE "A" MACHINE SHOP, INC., SOMETIME AFTER NOON ON 27 NOVEMBER 1962 ADVISING OF A MISTAKE IN BID. A CHECK REVEALED THAT THE FILE COPY OF THE SIGNED JOB ORDER HAS BEEN RETURNED TO THE CONTRACT SECTION FROM THE CORRESPONDENCE SECTION. SINCE CONTRACT DOCUMENT WAS SIGNED AND IN THE MAIL, I ADVISED MR. LEGETTE THAT THE FACTS CONCERNING THIS MATTER SHOULD BE SUBMITTED IN WRITING AS A MISTAKE IN BID AFTER AWARD . . .'

AS AN ALTERNATIVE ARGUMENT, COUNSEL FOR TRIPLE "A" CONTENDS THAT EVEN IF THE NAVY AFFIRMATIVELY ESTABLISHES THAT JOB ORDER NO. 951 WAS IN FACT MAILED PRIOR TO ANY NOTIFICATION OF ERROR, THE CONTRACTING OFFICER SHOULD HAVE NONETHELESS SUSPECTED THE EXISTENCE OF A MISTAKE SINCE NOT ONLY WAS THE TRIPLE "A" BID APPROXIMATELY 50 PERCENT LESS THAN THE NEXT LOWEST BID, BUT ALSO APPROXIMATELY 48 PERCENT LESS THAN THE GOVERNMENT'S OWN ESTIMATE. ALTHOUGH THE NAVY GENERALLY RECOGNIZES THAT A CONTRACTING OFFICER SHOULD REQUEST VERIFICATION WHENEVER A BID IS CLEARLY OUT OF LINE WITH THEIR OWN ESTIMATE AND OTHER BIDS RECEIVED, THE DIRECTOR OF CONTRACTS CONTENDS THAT THE CONTRACTING OFFICER COULD NOT BE CHARGED WITH CONSTRUCTIVE NOTICE OF ERROR HERE BECAUSE TRIPLE "A" HAS OFTEN SUBMITTED BIDS CONSIDERABLY BELOW BOTH THE NEXT LOW BID AND THE GOVERNMENT'S ESTIMATE. IN SUPPORT THEREOF THE NAVY STATES THAT A SURVEY OF 56 PROCUREMENTS ON WHICH TRIPLE "A" WAS THE LOW BIDDER FOR THE PERIOD 1961- 1963 REVEALS THAT IN A MAJORITY OF THE CASES THE NEXT LOW BID WAS 15 PERCENT OR MORE HIGHER THAN THAT SUBMITTED BY TRIPLE "A" AND IN 93 PERCENT OF THE CASES THE BID SUBMITTED BY TRIPLE "A" WAS BELOW THE GOVERNMENT'S ESTIMATE. ALTHOUGH SUCH AN ARGUMENT MAY APPEAR TO HAVE SOME VALIDITY AT FIRST BLUSH, WE ARE INCLINED TO DISAGREE WITH THE CONCLUSIONS REACHED BY THE NAVY IN VIEW OF THE LIMITED ASPECT OF THEIR SURVEY. IN HIS AFFIDAVIT MR. LEGETTE STATES:

"* * * DURING THE YEARS 1961 TO THE DATE OF THIS LETTER, THE TRIPLE "A" MACHINE SHOP, INC., SUBMITTED 285 BIDS IN RESPONSE TO INVITATIONS FOR BIDS ISSUED BY THE INDUSTRIAL MANAGER, TWELFTH NAVAL DISTRICT, AND THAT ONLY 74 OF THOSE BIDS WERE DETERMINED TO BE THE LOWEST BIDS.' IN SUBSTANCE, THEREFORE, IT WOULD APPEAR THAT THE NAVY HAS ATTEMPTED TO FIND A JUSTIFICATION FOR ITS FAILURE TO REQUEST VERIFICATION BY REPORTING THE RESULTS OF A SURVEY WHICH WAS CONDUCTED ON A SELECTED GROUP OF AWARDS. SUCH A SELECTIVELY BASED SAMPLE DOES NOT, IN OUR JUDGMENT, JUSTIFY THE CONCLUSIONS REACHED IN THIS CASE.

AS A GENERAL RULE, WHEN A UNILATERAL ERROR IS ALLEGED AFTER AWARD, THE CONTRACT IS NOT SUBJECT TO REFORMATION SINCE A BINDING AND ENFORCEABLE CONTRACT ARISES UPON ACCEPTANCE. SALIGMAN V. UNITED STATES, 57 F.SUPP. 505, AND CASES CITED THEREIN. THIS GENERAL RULE, HOWEVER, IS NOT FOR APPLICATION WHERE THE CIRCUMSTANCES ARE SUCH THAT THE CONTRACTING OFFICER, HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR PRIOR TO AWARD. IN SUCH CASES, ACCEPTANCE BY THE CONTRACTING OFFICER DOES NOT RESULT IN A BINDING CONTRACT AND EITHER OUR OFFICE OR THE COURTS WILL FOLLOW APPROPRIATE RELIEF. 37 COMP. GEN. 685; 17 COMP. GEN. 575. COURSE, ANY SUCH ADJUSTMENT MAY NOT RESULT IN THE TOTAL CORRECTED PRICES EXCEEDING THE PRICE QUOTED IN THE NEXT LOW ACCEPTABLE BID. 37 COMP. GEN. 398; 37 COMP. GEN. 685.

IN THE CASE UNDER DISCUSSION WE BELIEVE THAT THE RECORD CLEARLY SHOWS NOT ONLY THE EXISTENCE OF THE ALLEGED ERROR, BUT THAT THE CONTRACTING OFFICER WAS AT LEAST PLACED ON NOTICE OF THE POSSIBILITY OF ERROR AND THEREFORE SHOULD NOT HAVE ACCEPTED THE BID SUBMITTED BY TRIPLE "A" WITHOUT FIRST OBTAINING VERIFICATION. IN VIEW THEREOF, THE CONTRACT AWARDED TO TRIPLE "A" SHOULD BE AMENDED TO INCREASE THE PRICE TO $19,620, THE AMOUNT OF THE LOWEST ACCEPTABLE BID. IT SHOULD BE NOTED IN THIS INSTANCE THAT THE NET EFFECT OF THE CONTRACTING OFFICER'S ACTION WAS AN AWARD TO TRIPLE "A" AT THE PRICE BID BY ANOTHER BIDDER. THE LATTER BIDDER SHOULD, AND MIGHT WELL HAVE, RECEIVED THE AWARD IF THE CONTRACTING OFFICER HAD DISCHARGED HIS OBLIGATION TO REQUEST ..END :