B-154913, AUG. 25, 1964

B-154913: Aug 25, 1964

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

B-154913, AUG. 25, 1964

TO VICE ADMIRAL JOSEPH M. LYLE, DIRECTOR, DEFENC SUPPLY AGENCY:

WE ARE IN RECEIPT OF A LETTER DATED AUGUST 5, 1964, WITH ENCLOSURES, FROM YOUR ASSISTANT COUNSEL REQUESTING OUR DECISION ON WHETHER MIDWEST SALES COMPANY, INCORPORATED, MAY BE PERMITTED TO WITHDRAW THEIR BID ON A CERTAIN ITEM AFTER AWARD OF A CONTRACT.

ON JANUARY 22, 1964, THE DEFENSE SURPLUS SALES OFFICE, MEMPHIS, TENNESSEE, ISSUED INVITATION FOR BIDS NO. 31-S-64-43, ANNOUNCING THE SALE OF SOME 70 ITEMS OF SCRAP MATERIAL. MIDWEST SALES COMPANY, INCORPORATED, SUBMITTED THE HIGHEST BID ON ITEMS NO. 8, 9 AND 13 AND WAS AWARDED A CONTRACT FOR THESE SAME ITEMS ON FEBRUARY 14, 1964. BY LETTER DATED FEBRUARY 18, 1964, MIDWEST SALES ASKED THAT IT BE ALLOWED TO WITHDRAW ITS BID ON ITEM NO. 9 CLAIMING AN ERROR IN THE SUBMISSION OF ITS BID. SPECIFICALLY THEY STATE:

"OUR BID, AS SHOWN ON ATTACHED AWARD SHEET, IS FOR .273 PER POUND WHEREAS OUR INTENTION WAS TO BID ON THE BASIS OF .273 EACH. TO SUBSTANTIATE THIS FACT, WE ARE ATTACHING THREE OTHER AWARDS ON PONCHOS, OF RECENT DATE, SHOWING OUR BID TO BE .28 CENTS EACH, .33 CENTS EACH, AND .07 CENTS PER POUND. THE .07 CENTS BID WAS FOR PONCHOS AT FORT LEONARD WOOD, MO. WHERE THOSE NOW IN QUESTION ARE LOCATED.

"AS FURTHER EVIDENCE THAT BID WAS DEFINITELY AN ERROR, WE ARE ATTACHING A COPY OF OUR CURRENT CATALOG WHICH WE SEND ALL OVER THE COUNTRY TO OUR CUSTOMERS. YOU WILL NOTE ON PAGE 22 THAT WE SELL THESE PONCHOS AT .90 CENTS EACH. AT 27.3 CENTS PER POUND, WITH EACH ONE WEIGHING 3 POUNDS, OUR COST WOULD BE .82 CENTS EACH. ADD TO THIS .10 CENTS FREIGHT, PLUS .10 CENTS FOR REPAIRS, PLUS 15 PERCENT WHICH IS THE AVERAGE WE HAVE FOUND THAT ARE UNUSABLE AND YOU CAN READILY SEE THAT UNDER NO CIRCUMSTANCES WOULD WE EVER INTENTIONALLY BID 27.3 CENTS PER POUND.'

OTHER BIDS RECEIVED FOR ITEM NO. 9 WERE ?0129, ?05188, ?056 AND ?01125 PER POUND. BECAUSE OF PAST EXPERIENCE THE MARKET APPRAISAL OF THIS ITEM WAS SET AT ?05 PER POUND.

IN HIS REPORT, THE CONTRACTING OFFICER POINTS OUT THAT THE FOUR LOW BIDDERS WERE GEOGRAPHICALLY LOCATED SOME DISTANCE FROM THE DISPOSAL OFFICE AND THAT THE COST OF TRANSPORTATION WAS PROBABLY A FACTOR; WHEREAS, MIDWEST SALES, BEING LOCATED IN THE SAME CITY, WOULD NOT HAVE TO CONSIDER TRANSPORTATION IN THEIR ACTUAL COST OF THE ITEM. THE ABOVE RATIONALIZATION WAS OFFERED AS ONE OF THE REASONS WHY VERIFICATION WAS NOT REQUESTED EVEN THOUGH THE CONTRACTING OFFICER RECOGNIZED THE EXISTENCE OF THE POSSIBILITY OF AN ERROR.

WHERE A MISTAKE IN BID IS ALLEGED AFTER ITS ACCEPTANCE, THE PRIMARY QUESTION IS WHETHER THE ACCEPTANCE CONSUMMATED A VALID AND BINDING CONTRACT. IN THE ABSENCE OF NOTICE, EITHER ACTUAL OR CONSTRUCTIVE, IMPUTABLE TO THE CONTRACTING OFFICER, THAT THE BID WAS PROBABLY IN SOME WAY ERRONEOUS, HIS ACCEPTANCE THEREOF IN GOOD FAITH WOULD CONVERT THE BIDDER'S EXPRESSED OFFER INTO A LEGAL OBLIGATION TO PERFORM IN ACCORDANCE WITH HIS OFFER. B-152092, AUGUST 16, 1963. IN SUCH A CASE, PROOF OF ERROR, NO MATTER HOW CONCLUSIVE, CANNOT AFFECT THE VALIDITY OF THE CONTRACT OR CONSTITUTE A VALID BASIS FOR RESCISSION OR REFORMATION. SEE 30 COMP. GEN. 36. IN THIS CASE, HOWEVER, THE EVIDENCE LEAVES LITTLE DOUBT BUT THAT THE CONTRACTING OFFICER HAD CONSTRUCTIVE, IF NOT ACTUAL NOTICE OF ERROR EVEN THOUGH HE CHOSE TO RATIONALIZE HIS FAILURE TO REQUEST VERIFICATION. ACCORDINGLY, ACCEPTANCE OF THE BID MAY NOT BE HELD TO HAVE RESULTED IN A VALID AND BINDING CONTRACT. SEE B-153039, DECEMBER 30, 1963, AND CASES CITED THEREIN.

IN VIEW THEREOF, WE ARE IN AGREEMENT WITH THE CONTRACTING OFFICER'S RECOMMENDATION THAT THE CONTRACT BE REFORMED BY OMITTING ITEM NO. 9 THEREFROM, WITHOUT PENALTY TO THE CONTRACTOR.