B-154788, SEP. 18, 1964

B-154788: Sep 18, 1964

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TO THE HONORABLE SECRETARY OF COMMERCE: REFERENCE IS MADE TO LETTER DATED AUGUST 19. THE BIDS WERE OPENED AS SCHEDULED ON JUNE 29. WAS THE LOWEST OF SEVEN BIDS RECEIVED. THE GOVERNMENT ENGINEER'S ESTIMATE WAS $521. THE BID SCHEDULE WAS COMPRISED OF 30 SEPARATE PAY ITEMS ON WHICH (EXCEPT FOR ONE DESIGNATED CONTINGENT SUM) UNIT BID PRICES WERE REQUIRED. MCEWEN DESCRIBES THE HASTY MANNER IN WHICH HE AND HIS OFFICE MANAGER PREPARED HIS BID AND HE STATES THAT AS SOON AS THE BIDS WERE READ HE REALIZED. THAT A MISTAKE MUST HAVE BEEN MADE IN HIS BID. THESE MISTAKES WERE SET FORTH AS FOLLOWS IN A "CLAIM OF ERROR" SUBMITTED BY MR. 1964) TO THE BUREAU OF PUBLIC ROADS TOGETHER WITH THE ORIGINAL WORKPAPERS: "ON ITEM 102 (1) DAILY COSTS WERE ADDED INCORRECTLY.

B-154788, SEP. 18, 1964

TO THE HONORABLE SECRETARY OF COMMERCE:

REFERENCE IS MADE TO LETTER DATED AUGUST 19, 1964, FILE 32-64, FROM YOUR FEDERAL HIGHWAY ADMINISTRATOR, BUREAU OF PUBLIC ROADS, FURNISHING THIS OFFICE WITH A REPORT RELATIVE TO THE PROTEST OF MR. F. H. MCEWEN AGAINST THE BUREAU'S REFUSAL TO ALLOW HIM TO WITHDRAW HIS BID UNDER INVITATION DATED JUNE 10, 1964, REFERENCE OREGON FDR SISKIYOU 333-C2, D1, F1, G2, FOR RECONSTRUCTION AND OTHER WORK ON AGNESS ROAD, OREGON FOREST DEVELOPMENT ROAD.

THE BIDS WERE OPENED AS SCHEDULED ON JUNE 29, 1964, AT THE BUREAU OF PUBLIC ROADS IN PORTLAND, OREGON. THE MCEWEN BID AT $478,401.85, WAS THE LOWEST OF SEVEN BIDS RECEIVED. THE OTHER BIDS RANGED IN AMOUNTS FROM $546,905 TO $608,599, AND THE GOVERNMENT ENGINEER'S ESTIMATE WAS $521,644.50. THE BID SCHEDULE WAS COMPRISED OF 30 SEPARATE PAY ITEMS ON WHICH (EXCEPT FOR ONE DESIGNATED CONTINGENT SUM) UNIT BID PRICES WERE REQUIRED. IN AN AFFIDAVIT EXECUTED ON JUNE 30, 1964, MR. MCEWEN DESCRIBES THE HASTY MANNER IN WHICH HE AND HIS OFFICE MANAGER PREPARED HIS BID AND HE STATES THAT AS SOON AS THE BIDS WERE READ HE REALIZED, BECAUSE OF THE SUBSTANTIAL DIFFERENCE IN PRICE BETWEEN HIS BID AND THE NEXT LOW BID AS WELL AS THE ENGINEER'S ESTIMATE, THAT A MISTAKE MUST HAVE BEEN MADE IN HIS BID. THEREUPON, HE CALLED HIS OFFICE MANAGER IN EUGENE TO ASK THAT A CHECK BE MADE OF THE WORKPAPERS. WHEN MR. MCEWEN ARRIVED IN EUGENE THAT EVENING THE OFFICE MANAGER ADVISED THAT HE HAD DISCOVERED THREE MISTAKES IN THE BID. THESE MISTAKES WERE SET FORTH AS FOLLOWS IN A "CLAIM OF ERROR" SUBMITTED BY MR. MCEWEN THE NEXT DAY (JUNE 30, 1964) TO THE BUREAU OF PUBLIC ROADS TOGETHER WITH THE ORIGINAL WORKPAPERS:

"ON ITEM 102 (1) DAILY COSTS WERE ADDED INCORRECTLY. INSTEAD OF $1,000.00 THE COSTS TOTAL $1,200.00 AND DIVIDING BY 1500 CU YD, THE CU YD PRICE SHOULD HAVE BEEN 80 CENTS INSTEAD OF THE 70 CENTS BID.

"ON ITEM 102 (6) THE 19 CENTS PER CU YD ADDITIONAL FIGURED FOR THE ROAD, PIT STRIPPING, AND SUPERINTENDENT AND BOND WAS NOT INCORPORATED INTO THE BID.

"ON ITEM 453 (3) (1) THE COST OF THE PIPE WAS NOT INCLUDED IN THE BID. IT WAS BID AT THE PRICE FOR LAYING THE PIPE. INSTEAD OF $7.20 PER LINEAL FOOT THIS ITEM SHOULD HAVE BEEN BID AT $31.20 PER LINEAL FOOT. THE COST OF THE PIPE WITH BANDS WAS $24.00 PER LINEAL FOOT.

"THE AMOUNT DEFICIENT IN THE BID IS AS FOLLOWS:

CHART

ITEM 102 (1) 120,000 CU YD AT 10 CENTS $12,000.00

ITEM 102 (6) 110,000 CU YD AT 19 CENTS 20,900.00

ITEM 453 (3) (1) 124 1F AT $24.00 2,976.00

TOTAL $35,876.00"

ADDITIONAL EXPLANATION OF THE MISTAKES IS FURNISHED IN AN AFFIDAVIT BY THE OFFICE MANAGER WHICH PROVIDES IN PERTINENT PART:

"WHILE MR. MCEWEN WAS RETURNING TO EUGENE, I EXAMINED THE WORK SHEETS (EXHIBIT D) AND DISCOVERED THREE ERRORS AS FOLLOWS:

"1. WITH RESPECT TO ITEM 102 (1), MR. MCEWEN HAD ESTIMATED THAT WE COULD PRODUCE APPROXIMATELY 1500 CUBIC YARDS PER DAY. I THEREFORE USED FIGURES TO ESTIMATE WHAT OUR DAILY COST WOULD BE FOR OPERATING THE EQUIPMENT NEEDED FOR THAT PHASE OF THE WORK. I TOTALED THE FOUR ITEMS INVOLVED AND DIVIDED THE RESULTING TOTAL BY 1500 C.Y. TO OBTAIN A UNIT PRICE PER CUBIC YARD. IN MAKING MY ADDITION OF THE FOUR ITEMS, I TOTALLED THEM AT 1,000 INSTEAD OF 1,200, AND THE MISTAKE IS OBVIOUS AND APPARENT ON THE FACE OF MY WORK SHEET. IN DIVIDING 1,000 BY 1,500 C.Y., I CAME TO THE RESULT OF 66 2/3 CENTS PER CUBIC YARD. I ASKED MR. MCEWEN WHETHER WE SHOULD BID 65 CENTS OR 70 CENTS, AND HE SAID TO ROUND IT OUT TO 70 CENTS. HAD I PROPERLY ADDED THE FOUR ITEMS AND OBTAINED THE TOTAL OF 1,200, AND DIVIDED THE 1,200 DAILY COST BY 1,500 C.Y., I WOULD HAVE OBTAINED OUR INTENDED BID PRICE OF 80 CENTS PER C.Y. FOR THIS ITEM.

"2. ON ITEM 102 (6), I ESTIMATED THE DAILY COST AT $750.00, WHICH ARE DIVIDED BY THE ESTIMATED DAILY YARDAGE OF 1,000, ARRIVING AT A RESULTING PER UNIT COST OF 75 CENTS, WHICH FIGURE WAS USED FOR THE BIDDING. HOWEVER, WE HAD IN NO PLACE IN OUR BID PROVIDED FOR THE BUILDING OF A ROAD TO THE BORROW PIT, FOR THE STRIPPING AND RE-GRADING OF THE CRUSHING AREA, NOR FOR THE SUPERINTENDENT AND BOND COSTS INVOLVED IN THE JOB. MR. MCEWEN HAD INSTRUCTED ME TO INCLUDE THESE ITEMS UNDER ITEM 102 (6), AND I HAD DETERMINED THAT THE TOTAL COST OF THESE ITEMS WOULD BE $20,000.00, OR IF APPLIED TO ITEM 102 (6), 19 CENTS PER CUBIC YARD. THIS 19 CENTS, WHEN ADDED TO THE 75 CENTS FOR THE DIRECT COSTS OF ITEM 102 (6), TOTALLED 94 CENTS, WHICH IS THE FIGURE I SHOULD HAVE USED ON OUR BID SCHEDULE AND IN THE EXTENSIONS THEREOF. INSTEAD, I USED THE 75 CENTS FIGURE AND OMITTED ALTOGETHER THE INCLUSION OF THE ADDITIONAL 19 CENTS, OR A TOTAL OF $20,900.00.

"3. IN PREPARING THE BID FOR ITEM 453 (1), APPEARING AT THE TOP OF PAGE 3, (EXHIBIT D), I HAD THE FIGURES OF THE PIPE FOR MATERIALS AT $20.00 AND $4.00 PER LINEAL FOOT AND $7.20 FOR THE COST OF LAYING THE PIPE. INSTEAD OF TOTALLING THESE THREE FIGURES AT $31.20, WHICH WAS OUR INTENDED BID, I INADVERTENTLY AND MISTAKENLY USED ONLY THE $7.20 FIGURE FOR LAYING THE PIPE. THE FIGURES WRITTEN IN AFTER THE BID HAVE BEEN ENCIRCLED AND DESIGNATED AS INDICATED IN MR. MCEWEN'S LETTER OF JUNE 30, WHICH IS EXHIBIT C.'

THE BUREAU'S ANALYZATION OF THE ALLEGED MISTAKES IS SET FORTH IN ITS REPORT OF AUGUST 19 AS FOLLOWS:

"IN THE MCEWEN BID FOR ITEM 453 (1), 72-INCH 10-GAGE GALVANIZED CORRUGATED METAL PIPE, THERE IS AN OBVIOUS ERROR IN THE BID OF $7.20 PER LINEAR FOOT. FOR THIS SIZE PIPE, THE USUAL UNIT PRICE RANGE IS $30.00 TO $40.00 PER LINEAR FOOT. THE ENGINEER'S ESTIMATED UNIT PRICE IS $37.00; THE SIX BIDS ON THE ITEM, OTHER THAN THE MCEWEN BID, RANGED FROM $35.00 TO $44.00. IN MR. MCEWEN'S LETTER OF JUNE 30, 1964, TO THE BUREAU'S PORTLAND OFFICE, HE STATES THE $7.20 BID WAS THE PRICE FOR LAYING THE PIPE AND DID NOT INCLUDE THE COST OF THE PIPE. HE FURTHER STATES THAT THE COST OF PIPE WITH BANKS IS $24.00 PER LINEAR FOOT AND THAT THE BID SHOULD HAVE BEEN $31.20 PER LINEAR FOOT. REGARDLESS OF WORK SHEETS EVIDENCE, IT IS CLEAR THAT THE BID OF $7.20 SUBMITTED WAS NOT INTENDED AND THAT THE CLAIMED INTENDED BID OF $31.20, TO INCLUDE THE PIPE AND BAND COST AS QUOTED BY THE SUPPLIER, IS REASONABLE AND ACCEPTABLE. (BEALL PIPE AND TANK CORPORATION, BY LETTER DATED JUNE 25, 1964, HAD QUOTED $20.00 PER FOOT FOR THE 72-INCH PIPE AND $40.00 FOR BANDS, THE LATTER EQUIVALENT TO $4.00 PER LINEAR FOOT FOR 10-FOOT LENGTHS.) IT IS ALSO CONVINCING THAT THE QUANTITY AND AMOUNT INVOLVED ARE NOT A COMBINATION THAT WOULD BE OPEN TO QUESTION ON WHETHER OR NOT CLAIM OF ERROR COULD BE A MANIPULATION TO INCREASE THE LOW BID. THE ERROR, HOWEVER, DOES NOT JUSTIFY WITHDRAWAL OF THE BID AS REQUESTED, AS THE BID WITH ITEM 453 (1) CORRECTED OR UNCORRECTED, IS THE LOWEST RECEIVED AND IS WITHIN A REASONABLE AND USUAL RANGE OF ACCEPTABLE PERCENTAGE VARIATION FROM THE ENGINEER'S ESTIMATE. THE LOW BID AS SUBMITTED IS 8.9 PERCENT UNDER THE ENGINEER'S ESTIMATE, WHICH IS INCLUDED IN THE COPY OF THE BID TABULATION ENCLOSED.

"IN CONSIDERING WHETHER OR NOT CORRECTION OF THE BID UNIT PRICE BY F. H. MCEWEN FOR ITEMS 102 (1) AND 102 (6) WOULD BE JUSTIFIED, THERE AROSE THE QUESTIONS ON THE ADEQUACY OF THE MCEWEN SUPPORT OF THE CLAIMS OF ERROR AND THE ASPECTS OF UNBALANCED BIDDING.

"THE WORK SHEETS PRESENTED SHOW AN ERROR IN ADDITION OF THE COST COMPONENTS FOR ITEM 102 (1), UNCLASSIFIED EXCAVATION. THE DETAIL IN THE WORK SHEETS (EXHIBIT D) IS LIMITED TO FOUR ENTRIES FOR EQUIPMENT AT HOURLY RATES FOR EACH APPLIED TO EIGHT HOURS TO ARRIVE AT A COST PER DAY, WHICH COST IS DIVIDED BY "1,500 C.Y.' (APPARENTLY THE ESTIMATED AVERAGE DAILY PRODUCTION) TO ARRIVE AT THE UNIT BID PRICE OF $ .70 ($ .66 2/3 PLUS "ADD 3 1/3.'' THE COST PER DAY ADDS TO $1,200 INSTEAD OF $1,000, THE TOTAL ON THE WORK SHEET. MR. MCEWEN CLAIMS IT WAS HIS INTENTION TO BID $ .80 ON THE BASIS OF A COST PER DAY OF $1,200 DIVIDED BY "1,500 C.Y.' NO MARGIN CORRESPONDING TO THE ,ADD 3 1/3" IS MENTIONED. ALTHOUGH IT IS NOT OUR INTENTION TO DICTATE THE EXTENT OF COST BREAKDOWN ESSENTIAL IN SOUND BALANCED BIDDING, WE CANNOT CLASS THE MEAGRE DETAIL ON THE WORK SHEETS AS CLEAR AND CONVINCING EVIDENCE THAT THE ITEM WAS BID IN BALANCE AND REPRESENTS A REALISTIC DETERMINATION OF THE COST OF THE WORK. IT IS NOT CLEAR FROM THE ENTRIES THAT ALL DIRECT AND INDIRECT COSTS (LABOR, SUPPLIES, OVERHEAD, ETC.) ARE INCLUDED. FOR EXAMPLE, IT IS STATED IN MR. MCEWEN'S EXHIBIT B THAT "WE HAD NO PLACE IN OUR BID PROVIDED FOR * * * THE SUPERINTENDENT AND BOND COSTS INVOLVED IN THE JOB," AND IT IS NOT CLEAR TO WHAT EXTENT SUCH COSTS WERE ALSO ALLOWED FOR IN THE WORK SHEET FIGURES WHICH ARE ONLY EQUIPMENT HOURLY RATES FOR THE COST COMPONENTS.

"ITEM 102 (6), SELECTED BORROW, TOPPING, CASE 1, WAS BID AT $ .75 PER CUBIC YARD BY F. H. MCEWEN. THE CLAIM IS THAT $ .94 WAS THE INTENDED BID. IT WILL BE NOTED ON THE WORK SHEETS AND IN THE MCEWEN EXHIBIT B, THAT THE CLAIMED INTENTION IN BIDDING ITEM 102 (6) WAS TO INCLUDE ALL THE BOND AND SUPERINTENDENT EXPENSE IN THE ONE ITEM RATHER THAN SPREADING IT AT LEAST OVER A NUMBER OF THE MORE IMPORTANT ITEMS. CORRECTION, IF PERMITTED, WOULD INVOLVE THE GOVERNMENT IN PARTICIPATING IN A KNOWN UNBALANCED BID WHICH COULD WORK TO THE GOVERNMENT'S DISADVANTAGE IN QUANTITY VARIATIONS DURING CONSTRUCTION. FOR EXAMPLE, IF CORRECTION WERE PERMITTED AND THERE SHOULD DEVELOP AN OVERRUN IN ITEM 102 (6), THE GOVERNMENT WOULD BE OVERCHARGED FOR SUPERINTENDENT AND BOND EXPENSE. THIS ALONE, REGARDLESS OF OTHER INADEQUACIES IN SUPPORT OF COSTS, IS A VALID REASON FOR OUR DECISION NOT TO CORRECT THE BID FOR THIS ITEM.

"THERE IS NO INTENTION HERE TO CHARGE THAT THE WORK PAPERS SUBMITTED BY MR. MCEWEN ARE NOT AUTHENTIC. OUR CONCLUSION IS THAT THE TYPES OF MISTAKES CLAIMED FOR ITEMS 102 (1) AND 102 (6) DO NOT FALL INTO THE CATEGORY THAT MAY BE RECOGNIZED AND CORRECTED IN RESPONSIBLE AND SOUND ADMINISTRATION OF CONTRACT BIDDING AND AWARD.'

WHILE IT IS THE GENERAL RULE THAT A BIDDER UNDER AN ADVERTISED INVITATION FOR BIDS MAY NOT MODIFY OR WITHDRAW HIS BID AFTER BIDS HAVE BEEN OPENED, IT IS ALSO WELL ESTABLISHED THAT ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN DOES NOT CONSUMMATE A BINDING CONTRACT. FOR THIS REASON IT HAS BEEN A LONGSTANDING PRACTICE IN FEDERAL PROCUREMENT TO PERMIT WITHDRAWAL OF A BID UPON CONVINCING PROOF OF ERROR THEREIN. 42 COMP. GEN. 723. WE HAVE ALSO HELD THAT A GREATER DEGREE OF PROOF IS NECESSARY TO ALLOW CORRECTION OF AN ERRONEOUS BID THAN IS REQUIRED TO JUSTIFY WITHDRAWAL OF A BID, AND THAT, IN UNDERTAKING TO BIND A BIDDER BY ACCEPTANCE OF A BID AFTER NOTICE OF A CLAIM OF ERROR BY THE BIDDER, THE GOVERNMENT VIRTUALLY UNDERTAKES THE BURDEN OF PROVING EITHER THAT THERE WAS NO ERROR OR THAT THE BIDDER'S CLAIM WAS NOT MADE IN GOOD FAITH. COMP. GEN. 441.

IN THE PRESENT CASE YOUR REPORT ADVISES THERE IS NO INTENTION TO CHARGE THAT THE WORKPAPERS SUBMITTED BY MR. MCEWEN ARE NOT AUTHENTIC. THESE WORKSHEETS ADMITTEDLY SHOW A MATERIAL ERROR IN ADDITION OF THE COST COMPONENTS FOR ITEM 102 (1) AND INDICATE AN OMISSION OF 19 CENTS IN THE UNIT BID FOR ITEM 102 (6), WHICH THE OFFICE MANAGER CERTIFIES HE HAD BEEN DIRECTED TO INCLUDE IN THE BID PRICE OF THAT ITEM, AND THE CONCLUSION THAT ERRORS DID OCCUR IS SUPPORTED BY THE FACT THAT THE MCEWEN BID IS SUBSTANTIALLY LOWER THAN THE PRICE RANGE OF THE OTHER BIDS AND THE GOVERNMENT'S ESTIMATE FOR THE PROJECT. WHILE WE ARE THEREFORE OF THE OPINION THAT THE EVIDENCE OF RECORD CLEARLY INDICATES THAT ERRORS WERE MADE IN COMPUTING THE BID PRICE, WE MUST AGREE WITH THE BUREAU'S CONCLUSION THAT THE EVIDENCE DOES NOT ESTABLISH THE INTENDED BID PRICE, AND THAT THE MISTAKES THEREFORE DO NOT FALL WITHIN THE CATEGORY OF MISTAKES WHICH MAY BE CORRECTED. IN VIEW THEREOF, IT IS OUR FURTHER OPINION THAT MR. F. H. MCEWEN SHOULD BE PERMITTED TO WITHDRAW HIS BID.

THE FILE SUBMITTED WITH THE LETTER OF AUGUST 19 FROM THE FEDERAL HIGHWAY ADMINISTRATOR IS ..END :