B-153598, JAN. 7, 1965

B-153598: Jan 7, 1965

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TO THE HONORABLE SECRETARY OF THE AIR FORCE: REFERENCE IS MADE TO OUR LETTER OF MARCH 9. THE REQUESTED REPORT WAS FURNISHED BY THE HEADQUARTERS. NINE BIDS WERE RECEIVED. THE LOW BID OF $139.87 EACH FOR THE 87 RECHARGERS AND $300 FOR THE TECHNICAL DATA WAS UNSIGNED AND WAS NOT FOR CONSIDERATION IN MAKING AWARD OF A CONTRACT. THE SECOND LOW BID WAS A LUMP-SUM PRICE OF $22. 185 BUT THE BID FORM WAS INCOMPLETE AND IT WAS ELIMINATED FROM CONSIDERATION. THE BID OF THE COLSON-MERRIAM COMPANY IN THE AMOUNT OF $206.90 EACH FOR THE 87 RECHARGERS WAS THE NEXT LOWEST BID AND ALTHOUGH IT QUOTED NO PRICE FOR THE ACCOMPANYING TECHNICAL DATA IT COULD WELL BE PRESUMED THAT THE PRICE THEREFOR WAS INCLUDED IN THE PRICE FOR THE RECHARGERS.

B-153598, JAN. 7, 1965

TO THE HONORABLE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO OUR LETTER OF MARCH 9, 1964, TO YOUR REQUESTING A REPORT ON THE REQUEST OF THE CARLSON-MERRIAM COMPANY, BALTIMORE, MARYLAND, FOR RESCISSION OF CONTRACT NO. AF41/608/-26168 AND RELIEF FOR LIABILITY FOR ANY EXCESS COST ARISING FROM ITS DEFAULT IN THE PERFORMANCE OF SAID CONTRACT. THE REQUESTED REPORT WAS FURNISHED BY THE HEADQUARTERS, AIR FORCE ACCOUNTING AND FINANCE CENTER, DENVER, COLORADO, WITH ITS LETTER OF MAY 22, 1964, AND ITS LETTER OF SEPTEMBER 21, 1964, TRANSMITTING ADDITIONAL INFORMATION.

ON JUNE 17, 1963, THE SAN ANTONIO AIR MATERIEL AREA (SAAMA) ISSUED AN INVITATION FOR BIDS--- TO BE OPENED JULY 17, 1963--- FOR FURNISHING 87 OXYGEN RECHARGERS AND TECHNICAL DATA FOR THE SAME, ITEMS 1 AND 2, RESPECTIVELY. IN RESPONSE THERETO, NINE BIDS WERE RECEIVED. THE LOW BID OF $139.87 EACH FOR THE 87 RECHARGERS AND $300 FOR THE TECHNICAL DATA WAS UNSIGNED AND WAS NOT FOR CONSIDERATION IN MAKING AWARD OF A CONTRACT. THE SECOND LOW BID WAS A LUMP-SUM PRICE OF $22,185 BUT THE BID FORM WAS INCOMPLETE AND IT WAS ELIMINATED FROM CONSIDERATION. THE BID OF THE COLSON-MERRIAM COMPANY IN THE AMOUNT OF $206.90 EACH FOR THE 87 RECHARGERS WAS THE NEXT LOWEST BID AND ALTHOUGH IT QUOTED NO PRICE FOR THE ACCOMPANYING TECHNICAL DATA IT COULD WELL BE PRESUMED THAT THE PRICE THEREFOR WAS INCLUDED IN THE PRICE FOR THE RECHARGERS. FIVE OTHER BIDS RANGED FROM $429.72 TO $486 EACH FOR THE RECHARGERS AND THE PRICES FOR THE TECHNICAL DATA FROM $100 TO $750. THE HIGH BID WAS IN THE AMOUNT OF $1,267.90 EACH AND $500 FOR THE TECHNICAL DATA.

ON THE DAY AFTER THE OPENING OF BIDS OR ON JULY 18, 1963, THE CONTRACTING OFFICER SENT A TELEGRAM TO COLSON-MERRIAM IN WHICH HE ADVISED THAT DUE TO A WIDE VARIANCE IN BIDS HE SUSPECTED THAT POSSIBLY A MISTAKE IN BID HAD BEEN MADE AND HE REQUESTED IT TO REVIEW ALL DESCRIPTIONS, SPECIFICATIONS, DRAWINGS AND VENDOR QUOTATIONS, AND THAT IF THE BID PRICE WAS CORRECT, IT SHOULD CONFIRM ITS QUOTATION BY RETURN WIRE. BY TELEGRAM DATED JULY 23, 1963, COLSON-MERRIAM REPLIED AS FOLLOWS:

"REURTEL INVITATION 858 OUR BID PRICE STILL STANDS WIDE VARIANCES IN BIDS MAY BE CAUSED BY SETUP CHARGES MADE NECESSARY BY COMPLICATED DESIGN BELIEVE WE CAN DESIGN AN ACCEPTABLE TRUCK TO SELL FOR ONE THIRD THE PRICE WE QUOTED WILL GLADLY DO SO AS A PUBLIC SERVICE"

SINCE THE REPLY WAS NOT CONSIDERED A "CLEAR CUT" CONFIRMATION OF THE BID PRICE, THE GOVERNMENT BUYER CONTACTED MR. MERRIAM OF THE CONTRACTING FIRM BY TELEPHONE ON JULY 25, 1963, AND ASKED HIM TO WIRE BACK THAT THE BID PRICE WAS CORRECT OR THAT A MISTAKE HAD BEEN MADE. THE GOVERNMENT BUYER CONTENDS--- AND MR. MERRIAM DENIES--- THAT IN THE TELEPHONE CONVERSATION HE READ (FROM THE ABSTRACT OF BIDS) THE OTHER BIDDERS' NAMES AND THE UNIT COST (ROUNDED TO THE NEAREST DOLLAR) OF EACH OF THE OTHER BIDDERS. WHETHER THIS INFORMATION SO FURNISHED INCLUDED THE TWO LOWER BIDDERS--- NOT FOR CONSIDERATION AS HERETOFORE MENTIONED--- DOES NOT APPEAR IN THE RECORD. IN ITS TELEGRAM OF JULY 25, 1963, TO SAAMA, COLSON-MERRIAM CONFIRMED ITS BID PRICE OF $206.90 EACH FOR THE RECHARGERS. ON JULY 26, 1963, COLSON-MERRIAM WIRED SAAMA THAT ITS QUOTATION FROM ITS WHEEL SUPPLIER DID NOT INCLUDE TIRE AND TUBE AND THAT THE UNIT PRICE SHOULD BE $226.85. BY LETTER DATED JULY 26, 1963, THE CONTRACTING OFFICER INFORMED COLSON-MERRIAM OF THE DATA AND INFORMATION NECESSARY FOR A DETERMINATION FOR ALLOWANCES OF THE ADDITIONAL AMOUNT. ON JULY 29 COLSON-MERRIAM WIRED THE CONTRACTING OFFICER THAT HE SHOULD DISREGARD ITS TELEGRAM "RAISING PRICE" AND THAT IT WOULD FILL THE ORDER FOR ITS ORIGINAL QUOTATION OF $206.90 EACH. AWARD OF THE CONTRACT WAS MADE ON AUGUST 19, 1963.

BEFORE ANY WORK UNDER THE CONTRACT WAS BEGUN BY COLSON-MERRIAM IT WAS DISCOVERED BY ADMINISTRATIVE OFFICIALS IN THE BALTIMORE, MARYLAND, AREA THAT CERTAIN PRINTS IN THE POSSESSION OF THE CONTRACTOR WERE ILLEGIBLE BUT THIS MATTER WAS SETTLED SATISFACTORILY AND DOES NOT APPEAR TO BE RELEVANT TO THE MISTAKE ALLEGED TO HAVE BEEN MADE AND WHICH FORMS THE BASIS OF THE REQUEST FOR RELIEF. ON SEPTEMBER 26, 1963, THE CONTRACTOR REQUESTED AN INCREASE IN THE CONTRACT PRICE FROM $18,000.30TO $28,467, ALLEGING THAT ITS TOTAL COST FOR THE 87 RECHARGERS WAS $4,000 IN EXCESS OF ITS QUOTATION AND THAT IT HAD OVERLOOKED THE COST OF THE TECHNICAL DATA, ESTIMATED AT $2,600. LATER ON NOVEMBER 1, 1963, THE CONTRACTOR ADDRESSED A LETTER TO THE CONTRACTING OFFICER IN WHICH IT STATED THAT IT HAD INTENDED TO PROCEED WITH THE CONTRACT BUT UPON TALKING WITH THE GOVERNMENT BUYER CONCERNING THE PROCUREMENT OF THE OXYGEN FITTINGS, SUCH AS THE OXYGEN PRESSURE REGULATOR, THE OXYGEN PURIFIER CYLINDER, THE OXYGEN LINE HIGH PRESSURE VALVE, TUBING AND HOSE, IT DISCOVERED THAT THE PRIOR SUPPLIER OF THESE RECHARGERS, HENRY SPEN AND COMPANY, HAD QUOTED $445 EACH ON THE INSTANT INVITATION. THE RECORD DOES NOT DISCLOSE WHAT THE PRICE ON THE PREVIOUS PROCUREMENT WAS BUT IT IS ALLEGED THAT THE CONTRACT PRICE IN THE INSTANT PROCUREMENT IS OUT OF LINE WITH THAT OF THE PRIOR PURCHASE. THE CONTRACTOR INDICATED THAT IT HAD NO INTENTION OF PROCEEDING WITH THE CONTRACT AND SUSTAINING A LOSS OF APPROXIMATELY $16,000 ON ITS CONTRACT WHICH WAS IN THE AMOUNT OF $18,000.30 SINCE IT HAD OMITTED THE COSTS OF THE FITTINGS AND IT HAD NO IDEA THAT THE FITTINGS ,WERE SO EXPENSIVE.' WHILE IT IS ALLEGED THAT THE MISTAKE WAS CAUSED IN PART BY FAULTY OR ILLEGIBLE DRAWINGS AND SPECIFICATIONS, THIS HAS NOT BEEN ESTABLISHED.

UPON THE DEFAULT OF THE CONTRACTOR THE PROCUREMENT WAS READVERTISED AND IT IS INDICATED FROM AN ABSTRACT OF BIDS FURNISHED BY THE CONTRACTOR THAT SEVEN BIDS WERE RECEIVED AND THE LOW BID WAS THAT SUBMITTED BY SPEN WHICH WAS IN THE AMOUNT OF $385 EACH FOR THE RECHARGERS AND $450 FOR THE TECHNICAL DATA, OR APPROXIMATELY $16,000 IN EXCESS OF COLSON-MERRIAM'S PRICE OF $18,000.30.

THE QUESTION PRESENTED IS WHETHER THIS CASE COMES WITHIN THE DOCTRINE ENUNCIATED BY THE COURT IN THE CASE OF UNITED STATES V. METRO NOVELTY MANUFACTURING CO., 125 F.SUPP. 713. IN THAT CASE IT WAS HELD THAT THE ACCEPTANCE OF A BID WHICH THE CONTRACTING OFFICER SUSPECTED TO BE ERRONEOUS DID NOT RESULT IN A VALID AND BINDING CONTRACT ALTHOUGH THE BID PRICE HAD BEEN VERIFIED BY THE BIDDER BECAUSE THE CONTRACTING OFFICER SUSPECTED THE MANNER IN WHICH THE ERROR WAS MADE AND DID NOT CALL IT TO THE ATTENTION OF THE BIDDER WHEN REQUESTING VERIFICATION. SEE 35 COMP. GEN. 136. THIS PRINCIPLE HAS BEEN INCORPORATED IN THE ARMED SERVICES PROCUREMENT REGULATION, PARAGRAPH 2 406.3 (E) (1), WHEREIN CONTRACTING OFFICERS ARE INSTRUCTED TO ADVISE BIDDERS IN THE CASE OF SUSPECTED MISTAKES, NOT ONLY OF THE VARIANCES IN THE BIDS, IMPORTANT CHARACTERISTICS OF THE SPECIFICATIONS AND CHANGES, IF ANY, IN REQUIREMENTS FROM PREVIOUS PURCHASES OF SIMILAR ITEMS BUT OF SUCH OTHER DATA PROPER FOR DISCLOSURE TO THE BIDDER AS WILL GIVE HIM NOTICE OF THE SUSPECTED MISTAKE. IN THIS CASE, HENRY SPEN AND COMPANY FURNISHED THE ITEMS UNDER THE PREVIOUS PROCUREMENT. IT BID A UNIT PRICE OF $445 UNDER THE INVOLVED INVITATION FOR BIDS AS CONTRASTED WITH THE CONTRACTOR'S BID OF $209.60. WHILE IT MAY BE THAT THE PREVIOUS PROCUREMENT WAS UNDER A NEGOTIATED CONTRACT AND THE PRICE THEREUNDER MIGHT NOT HAVE BEEN CONCLUSIVE FOR COMPARATIVE PURPOSES, NEVERTHELESS IF THE CONTRACTOR HAD BEEN INFORMED OF THE FACT THAT SPEN HAD FURNISHED THESE RECHARGERS PREVIOUSLY AND WAS NOT QUOTING A UNIT PRICE OF $445 IT NO DOUBT WOULD HAVE ALERTED IT DEFINITELY OF THE FACT THAT IT HAD MADE A MISTAKE.

ASIDE FROM THE FOREGOING, WHILE IT MAY BE THAT AFTER THE CONTRACTOR VERIFIED ITS BID THE CONTRACTING OFFICER ORDINARILY WOULD BE UNDER NO FURTHER OBLIGATION TO MAKE INQUIRY AS TO THE CORRECTNESS OF THE BID THERE CAN BE NO DOUBT THAT THE BID OF COLSON-MERRIAM WAS NOT ONLY COMPLETELY OUT OF LINE WITH THE OTHER RESPONSIVE BIDS RECEIVED BUT ALSO CONSIDERABLY LOWER THAN THE PRICE PAID UNDER THE PRIOR CONTRACT. IN THESE CIRCUMSTANCES WE THINK THAT THE VERIFICATION OF ITS BID BY COLSON-MERRIAM WAS NOT SUFFICIENTLY ADEQUATE TO DISPEL THE ALREADY EXISTING DOUBT THAT THE GOVERNMENT CONTRACTING OFFICER HAD AS TO THE CORRECTNESS OF THE COMPANY'S BID AND, THEREFORE, THAT THERE STILL EXISTED AMPLE REASON FOR THE CONTRACTING OFFICER TO REQUEST A STILL FURTHER CLARIFICATION OF THE COMPANY'S BID PRIOR TO AWARD. MOREOVER, THERE CAN BE NO DOUBT FROM THE AMOUNT OF THE COMPANY'S BID ITSELF THAT THE COMPANY MADE AN ERROR IN ITS BID, AS ALLEGED.

IN VIEW OF THE FOREGOING, AND SINCE ENFORCEMENT OF THE CONTRACT WOULD BE INEQUITABLE WE ARE OF THE OPINION THAT THE CONTRACTOR SHOULD BE RELIEVED OF ANY LIABILITY OF ANY EXCESS COST INCURRED BY REASON OF ITS DEFAULT IN PERFORMANCE OF CONTRACT NO. AF 41/608/-26168.