B-156342, APR. 22, 1965

B-156342: Apr 22, 1965

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EDUCATION AND WELFARE: REFERENCE IS MADE TO A LETTER FROM THE CHIEF. AFTER IT WAS AWARDED CONTRACT NO. PH-29-65-14 FOR DENTAL LABORATORY SUPPLIES AND SERVICES WERE OPENED ON JUNE 19. PH-29-65 14 WAS AWARDED TO MUTUAL DENTAL LABORATORY. THE CONTRACT PROVIDED THAT THE CONTRACTOR WAS TO FURNISH THE SPECIFIED DENTAL LABORATORY SUPPLIES AND SERVICES TO THE PUBLIC HEALTH SERVICE OUTPATIENT CLINIC. INCLUDED IN THE CONTRACT WERE ITEMS 1C PROVIDING FOR "SET-UP ON BASEPLATE IN WAX (TEETH FURNISHED BY CONTRACTOR)" AND 1E PROVIDING FOR "TEETH. THE CONTRACTOR WROTE TO THE FINANCIAL OFFICER AT THE DETROIT PUBLIC HEALTH SERVICE HOSPITAL AGAIN REQUESTING A $5 ADJUSTMENT FOR ITEM 1C BECAUSE OF ITS ALLEGED MISTAKE POINTING OUT THAT THE PRESENT PRICE OF $5 RESULTS IN A NET LOSS OF APPROXIMATELY $5 FOR EVERY DENTURE PROCESSED SINCE THE COST OF THE TEETH SUPPLIED IN A DENTURE IS $4.59.

B-156342, APR. 22, 1965

TO THE HONORABLE, THE SECRETARY OF HEALTH, EDUCATION AND WELFARE:

REFERENCE IS MADE TO A LETTER FROM THE CHIEF, PROCUREMENT AND SUPPLY MANAGEMENT BRANCH, OA-GS, RECEIVED IN OUR OFFICE ON MARCH 17, 1965, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING A CLAIM FOR AN ADJUSTMENT IN PRICE RESULTING FROM AN ALLEGED MISTAKE IN BID DISCLOSED BY THE MUTUAL DENTAL LABORATORY, INC., AFTER IT WAS AWARDED CONTRACT NO. PH-29-65-14 BY THE PUBLIC HEALTH SERVICE.

BIDS UNDER INVITATION NO. PH-29-65-14 FOR DENTAL LABORATORY SUPPLIES AND SERVICES WERE OPENED ON JUNE 19, 1964, AND CONTRACT NO. PH-29-65 14 WAS AWARDED TO MUTUAL DENTAL LABORATORY, INC., THE LOWEST AGGREGATE BIDDER, ON JUNE 19, 1964, FOR ALL ITEMS CONTAINED IN THE INVITATION. THE CONTRACT PROVIDED THAT THE CONTRACTOR WAS TO FURNISH THE SPECIFIED DENTAL LABORATORY SUPPLIES AND SERVICES TO THE PUBLIC HEALTH SERVICE OUTPATIENT CLINIC, U.S. POST OFFICE BUILDING, CLEVELAND, OHIO, ON A NEED BASIS DURING THE PERIOD JULY 1, 1964, THROUGH JUNE 30, 1965. INCLUDED IN THE CONTRACT WERE ITEMS 1C PROVIDING FOR "SET-UP ON BASEPLATE IN WAX (TEETH FURNISHED BY CONTRACTOR)" AND 1E PROVIDING FOR "TEETH, FURNISHING OF.'

BY LETTER DATED JULY 31, 1964, THE CONTRACTOR REQUESTED A $5 ADJUSTMENT IN THE PRICE SET FORTH FOR ITEM 1C OF THE CONTRACT BECAUSE OF AN ALLEGED ERROR IN ITS BID. IT CLAIMED THAT IT HAD MISTAKENLY ASSUMED WHEN PREPARING ITS BID THAT ITEM 1C INCLUDED ONLY LABOR AND NOT THE COST OF TEETH, SINCE ITEM 1E COVERED THE FURNISHING OF TEETH BY CONTRACTOR. SEPTEMBER 25, 1964, THE CONTRACTOR WROTE TO THE FINANCIAL OFFICER AT THE DETROIT PUBLIC HEALTH SERVICE HOSPITAL AGAIN REQUESTING A $5 ADJUSTMENT FOR ITEM 1C BECAUSE OF ITS ALLEGED MISTAKE POINTING OUT THAT THE PRESENT PRICE OF $5 RESULTS IN A NET LOSS OF APPROXIMATELY $5 FOR EVERY DENTURE PROCESSED SINCE THE COST OF THE TEETH SUPPLIED IN A DENTURE IS $4.59. OCTOBER 15, 1964, THE ACTING CONTRACTING OFFICER REQUESTED THE CONTRACTOR TO FURNISH ADDITIONAL SUPPORTING EVIDENCE OF THE ALLEGED ERROR IN BID. THE CONTRACTOR REPLIED BY LETTER DATED DECEMBER 31, 1964, EXPLAINING THAT IT HAD NO WORKSHEETS NOR SUPPLIERS' QUOTATIONS TO SUPPORT ITS CLAIM OF ERROR, BECAUSE THE QUOTATIONS CONTAINED IN ITS BID WERE BASED PRIMARILY UPON MENTAL CALCULATIONS AND THE COMPANY'S EXPERIENCE. HOWEVER, CONTRACTOR AGAIN STATED THAT IT THOUGHT ITEM 1C WAS STRICTLY A LABOR ITEM, SINCE ITEM 1E CONCERNED THE FURNISHING OF TEETH, AND THAT, SINCE THE DISCOUNT COST OF TEETH WAS $4.59, ONLY 41 CENTS COVERED THE ENTIRE SETUP OPERATION, WHICH INCLUDED PICKUP AND DELIVERY, ARTICULATION OF MODELS, AND SELECTION AND SETUP OF TEETH. THE CONTRACTOR REQUESTED THAT THE CONTRACT BE REFORMED TO PROVIDE A UNIT PRICE FOR ITEM 1C OF $10. AS SO INCREASED THE UNIT PRICE WOULD STILL BE $2.29 LESS THAN THE BID OF THE OTHER BIDDER FOR THIS ITEM.

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, 56 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 CASE ACCEPTANCE BY THE CONTRACTING OFFICER DOES NOT RESULT IN A BINDING CONTRACT AND EITHER OUR OFFICE OR THE COURTS WILL ALLOW APPROPRIATE RELIEF. 37 COMP. GEN. 685; 17 COMP. GEN. 575. OF 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. WHILE THE BIDS HEREIN WERE TO BE CONSIDERED FOR AWARD TO THE LOWEST AGGREGATE BIDDER, IN WHICH CASE WE HAVE HELD THAT THE CONTRACTING OFFICER OWES NO DUTY TO EVALUATE EACH INDIVIDUAL ITEM OF THE INVITATION SEPARATELY, IT IS NOTED THAT THE GOVERNMENT HAD PREPARED NO ESTIMATES OF PRICES ON EITHER AN ITEM OR AN AGGREGATE BASIS AND HAD SPECIFIED NO QUANTITIES TO BE FURNISHED OF EACH ITEM IN THIS CASE. THEREFORE, RESORT TO THE INDIVIDUAL BID ITEM PRICES WOULD HAVE BEEN NECESSARY IN ORDER TO EVALUATE THE AGGREGATE BID, THERE BEING NO REQUIREMENT THAT PRICES WERE TO BE QUOTED BOTH ON AN ITEM AND AGGREGATE BASIS. COMPARE 42 COMP. GEN. 383. WE BELIEVE THAT THE FACT THAT THE PRICE OF $5 QUOTED FOR ITEM 1E, WHICH COVERED SERVICES ON TEETH TO BE FURNISHED BY THE CONTRACTOR WAS LESS THAN THE PRICE OF $6 QUOTED FOR ITEM 1D COVERING SIMILAR SERVICES ON TEETH TO BE FURNISHED BY THE GOVERNMENT WAS SUFFICIENT TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THIS COMPANY'S BID. CONSEQUENTLY, IT IS OUR VIEW THAT THE BID FOR ITEM 1C SHOULD NOT HAVE BEEN ACCEPTED WITHOUT REQUESTING THE COMPANY TO VERIFY ITS BID ON THAT ITEM. WE HAVE EXAMINED THE CORRESPONDENCE SUBMITTED BY THE CONTRACTOR AND ON THE BASIS OF THE FACTS AND EVIDENCE OF RECORD THERE APPEARS NO DOUBT THAT THE COMPANY MADE AN ERROR IN ITS BID AS ALLEGED AND IT IS APPARENT THAT THE INTENDED BID FOR THE ITEM IS OVER $10 WHEN COMPUTED ON THE BASIS OF THE $5 LABOR CHARGE BID AND THE COST OF TEETH, PICKUP AND DELIVERY, ARTICULATION OF MODELS, AND SELECTION AND SETUP OF TEETH.

ACCORDINGLY, AND SINCE THE CHIEF, PROCUREMENT AND SUPPLY MANAGEMENT BRANCH, REPORTS THAT THE LANGUAGE OF ITEM 1C WAS CONSIDERED AMBIGUOUS WHEN READ TOGETHER WITH ITEM 1E AND THAT THE INTERPRETATION PLACED ON THEM BY THE CONTRACTOR WAS REASONABLE, OUR OFFICE WILL NOT OBJECT TO REFORMING THE CONTRACT TO PROVIDE THAT THE PRICE OF ITEM 1C SHALL BE IN THE AMOUNT OF $10 AS RECOMMENDED BY THE CHIEF, PROCUREMENT AND SUPPLY MANAGEMENT BRANCH.

IN REGARD TO THE AWARD OF THE INSTANT CONTRACT WE NOTE THAT THE INVITATION FOR BIDS DID NOT CONTAIN ESTIMATED QUANTITIES OF THE ITEMS TO BE USED FOR BID EVALUATION AND AWARD PURPOSES. THEREFORE, IT IS OBVIOUS THAT EQUAL WEIGHT WAS GIVEN TO EACH ITEM IRRESPECTIVE OF THE QUANTITY WHICH MIGHT BE ORDERED. EVALUATION OF BIDS ON THIS BASIS WOULD BE PROPER ONLY IF AN EQUAL QUANTITY OF EACH ITEM IS ORDERED. SINCE UNDER A "REQUIREMENTS" TYPE OF CONTRACT THE QUANTITY OF THE ITEMS ORDERED VARIES, THE PROBABILITY ARISES THAT A BIDDER MAY BE FOUND LOW ON EVALUATION WHO IS NOT THE LOWEST BIDDER ON THE ACTUAL REQUIREMENTS, OR THE BEST ESTIMATE THEREOF. IN VIEW THEREOF, WE SUGGEST THAT THERE BE INCLUDED IN FUTURE INVITATIONS ESTIMATED QUANTITIES OF EACH ITEM TO BE USED FOR BID EVALUATION AND AWARD PURPOSES. THE ESTIMATED QUANTITIES SHOWN SHOULD BE MADE ON THE BASIS OF ALL KNOWN FACTS; FOR EXAMPLE, THE QUANTITIES MAY BE ESTIMATED FROM PREVIOUS REQUIREMENTS. SEE 1-3.409 (B) OF THE FEDERAL PROCUREMENT REGULATIONS REQUIRING THE STATING OF AN ESTIMATED QUANTITY FOR THE INFORMATION OF PROSPECTIVE CONTRACTORS. CF. 42 COMP. GEN. 257.