B-157166, AUG. 24, 1965

B-157166: Aug 24, 1965

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO LETTER DATED JUNE 28. REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS OF SURPLUS PROPERTY AMONG WHICH WAS ONE USED ROUTING MACHINE MANUFACTURED BY EKSTROM. SUCH ITEM WAS LISTED IN THE SALES BROCHURE AS USABLE WITHOUT REPAIRS. 587 AND SUCH BID WAS ACCEPTED AS TO ITEM 10 ON APRIL 2. EQUIPMENT COMPANY ADVISED THE SELLING ACTIVITY THAT THE CONDITION OF THE EKSTROM ROUTING MACHINE WAS NOT AS QUOTED IN THE SALES BROCHURE AS "USED. " IN THAT IT REQUIRED MAJOR REPAIRS AND THEREFORE WAS MISREPRESENTED IN THE SALES BROCHURE. A REVIEW OF THE DISPOSAL CASE AND SALES FOLDER BY THE SELLING ACTIVITY REVEALED THAT THE SUBJECT INVITATION FOR BIDS WAS ISSUED MARCH 3.

B-157166, AUG. 24, 1965

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER DATED JUNE 28, 1965, FILE REFERENCE MAT 255:CED 4500 (CD), WITH ENCLOSURES, FROM THE CHIEF OF NAVAL MATERIAL, REQUESTING A DECISION AS TO WHETHER SALES CONTRACT NO. N62777S-2298 AWARDED TO U.S. EQUIPMENT COMPANY, DETROIT, MICHIGAN, MAY BE RESCINDED.

INVITATION FOR BIDS NO. B-15-65-N62777S ISSUED BY THE INSPECTOR FOR NAVAL MATERIAL, PROPERTY DISPOSAL DIVISION, CHICAGO, ILLINOIS, REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS OF SURPLUS PROPERTY AMONG WHICH WAS ONE USED ROUTING MACHINE MANUFACTURED BY EKSTROM, CARLSON AND COMPANY, LISTED AS ITEM 10 ON THE INVITATION. SUCH ITEM WAS LISTED IN THE SALES BROCHURE AS USABLE WITHOUT REPAIRS. IN RESPONSE, U.S. EQUIPMENT COMPANY SUBMITTED A BID DATED MARCH 30, 1965, OFFERING TO PURCHASE THE ROUTING MACHINE DESCRIBED AS ITEM 10 AT A PRICE OF $1,587 AND SUCH BID WAS ACCEPTED AS TO ITEM 10 ON APRIL 2, 1965. THEREAFTER, BY LETTER DATED MAY 17, 1965, U.S. EQUIPMENT COMPANY ADVISED THE SELLING ACTIVITY THAT THE CONDITION OF THE EKSTROM ROUTING MACHINE WAS NOT AS QUOTED IN THE SALES BROCHURE AS "USED, USABLE W/O REPAIRS," IN THAT IT REQUIRED MAJOR REPAIRS AND THEREFORE WAS MISREPRESENTED IN THE SALES BROCHURE.

AFTER RECEIPT OF THIS COMPLAINT, A REVIEW OF THE DISPOSAL CASE AND SALES FOLDER BY THE SELLING ACTIVITY REVEALED THAT THE SUBJECT INVITATION FOR BIDS WAS ISSUED MARCH 3, 1965, TO ALL PROSPECTIVE BIDDERS ON THE CURRENT BIDDERS MAILING LIST. SUBSEQUENTLY, IT WAS LEARNED THAT THE ROUTING MACHINE WAS IN DAMAGED CONDITION, THEREFORE, AMENDMENT NO. 1 TO THE SUBJECT INVITATION WAS ISSUED ON MARCH 11, 1965, CHANGING THE CONDITION CODE TO READ THAT EXTENSIVE REPAIRS WERE REQUIRED ON THE ITEM IN LIEU OF THE USABLE WITHOUT REPAIRS DESCRIPTION USED IN THE ORIGINAL INVITATION. IT IS STATED THAT SUCH AMENDMENT WAS MAILED TO ALL PROSPECTIVE BIDDERS TO WHOM THE INVITATION HAD BEEN MAILED. THE CHIEF OF NAVAL MATERIAL HAS BEEN ADVISED THAT U.S. EQUIPMENT ALLEGES IT DID NOT RECEIVE THE AMENDMENT, WHICH CONTAINED THE STANDARD CAVEAT THAT "FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE ISSUING OFFICE PRIOR TO THE HOUR AND DATE FIXED FOR OPENING OF BIDS MAY RESULT IN THE REJECTION OF YOUR BID.' IT IS STATED IN THE CONTRACTING OFFICER'S REPORT THAT AWARD OF ITEM 10 TO U.S. EQUIPMENT COMPANY WAS MADE WITHOUT REFERENCE TO AMENDMENT NO. 1 WHICH WAS INADVERTENTLY OVERLOOKED BY THE PROPERTY DISPOSAL OFFICER. IN THIS CONNECTION WE NOTE FROM THE ABSTRACT OF THE 6 BIDS RECEIVED, 5 OF WHICH RANGED FROM $155 TO $386.83, FOR ITEM 10 THAT ONLY 2 BIDDERS RETURNED A SIGNED COPY OF AMENDMENT NO. 1 WITH THEIR BIDS. IT APPEARS TO BE THE VIEW OF THE CHIEF OF NAVAL MATERIAL THAT SINCE THE PURCHASER DID NOT EXERCISE HIS RIGHT OF INSPECTION, HE HAS ELECTED TO ASSUME ANY RISK WHICH MIGHT EXIST BY REASON OF A VARIANCE BETWEEN THE DESCRIPTION OF THE PROPERTY SET FORTH IN THE INVITATION AND THE PROPERTY ACTUALLY DELIVERED. WE WOULD GENERALLY AGREE WITH THIS VIEW WHERE A BUYER IS INVITED AND URGED TO INSPECT AND THERE IS A DISCLAIMER OF WARRANTY IN THE CONTRACT, AND FOLLOW THE DOCTRINE OF CAVEAT EMPTOR. SEE GENERALLY 41 COMP. GEN. 185, AND CASES THEREIN CITED. BUT SUCH A RULE CAN BE EFFECTIVE ONLY IF THE PARTIES HAVE ENTERED INTO A VALID CONTRACT OF SALE, AND SUCH IS THE ISSUE HERE PRESENTED. ORDINARILY, IN A SALE OF SURPLUS PROPERTY A DISPARITY IN THE PRICES BID DOES NOT PROVIDE A BASIS FOR PLACING A CONTRACTING OFFICER ON NOTICE OF PROBABLE ERROR. HOWEVER, IN THE INSTANT CASE, WE THINK THAT THE SUBSTANTIAL DISPARITY IN THE PRICE BID BY U.S. EQUIPMENT COMPANY WHEN CONSIDERED WITH THE FACT THAT THE COMPANY FAILED TO ACKNOWLEDGE THE AMENDMENT WHICH SERIOUSLY AFFECTED THE VALUE OF THE MACHINE SHOULD HAVE ALERTED THE CONTRACTING OFFICER TO THE POSSIBILITY OF A CLAIM OF MISREPRESENTATION. CONSEQUENTLY, THE BID SHOULD NOT HAVE BEEN ACCEPTED WITHOUT REQUESTING THE COMPANY TO VERIFY ITS BID.

ACCORDINGLY, THE ACCEPTANCE OF THE BID UNDER SUCH CIRCUMSTANCES MAY NOT BE REGARDED AS CONSUMMATING A VALID AND BINDING CONTRACT AND THE PURPORTED CONTRACT SHOULD BE CANCELLED.