B-157231, JUL. 28, 1965

B-157231, JUL. 28, 1965

TO ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION:

BY LETTER OF JULY 9, 1965, YOUR DIRECTOR OF PROCUREMENT HAS FORWARDED TO OUR OFFICE FOR DECISION THE REQUEST OF BEAVER INDUSTRIAL SUPPLY COMPANY TO BE EXCUSED FROM PERFORMANCE OF CONTRACT NO. NAS10 2194.

THE CONTRACT IN QUESTION WAS AWARDED TO BEAVER ON MARCH 8, 1965, ON THE BASIS OF ITS LOW BID SUBMITTED UNDER IFB NO. CC-304-5, ISSUED ON FEBRUARY 4, 1965, BY THE JOHN F. KENNEDY SPACE CENTER, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA), COCOA BEACH, FLORIDA. THE IFB SOLICITED BIDS TO SUPPLY 35 GRAY, DRAWER TYPE BINS, EQUIPTO NO. 3966 OR EQUAL. THE ITEM DESCRIPTION READS, IN PERTINENT PART AS FOLLOWS:

"THE SALIENT CHARACTERISTICS OF THE BRAND NAME PRODUCT ESSENTIAL TO THE MINIMUM NEEDS OF THE GOVERNMENT ARE AS FOLLOWS:

"THE VARIOUS STEEL COMPONENTS OF THE DRAWER UNITS WILL HAVE THE FOLLOWING MINIMUM THICKNESS:

CHART

UPRIGHTS 11 GAUGE STEEL

SIDE PANELS AND BACKS 22 GAUGE STEEL

SHELVES 18 GAUGE STEEL

DRAWERS AND DIVIDERS 22 GAUGE STEEL

"THE INTERIOR OF EACH DRAWER, AND BOTH SIDES OF THE DIVIDERS ARE TO BE COATED WITH GREY NYLON FLOCKING OR EQUAL TO GIVE PROTECTION TO SMALL PARTS AND SHARP CUTTING EDGES, AND TO ELIMINATE METAL TO METAL CONTACT EXCEPT FOR THE ITEMS STORED. THE DRAWERS ARE TO BE PROVIDED WITH FRONT SCOOP INSERTS TO AFFORD COMPARTMENT UNIFORMITY.'

ON FEBRUARY 24, THE THREE BIDS RECEIVED IN RESPONSE TO THE IFB WERE OPENED AS SCHEDULED. ALL THREE BIDDERS OFFERED THE EQUIPTO BRAND ITEMS. THE TWO LOWEST BIDS, BEAVER'S BID OF $232.00 PER UNIT AND THE BID OF THE GONDAS CORPORATION AT $233.38 PER UNIT, BORE NOTATIONS THAT THE BIDDERS WERE EQUIPTO DEALERS. THE HIGHEST BID, $249.66 PER UNIT, WAS SUBMITTED BY EQUIPTO, THE MANUFACTURER OF THE BRAND NAME ITEM. SINCE BEAVER WAS THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER AND ITS PRICE WAS WITHIN CLOSE PROXIMITY OF THE GONDAS BID, AWARD WAS MADE TO BEAVER ON MARCH 8.

ON MARCH 9, BEAVER NOTIFIED THE PROCURING ACTIVITY BY TELEGRAM THAT IT HAD ERRONEOUSLY OMITTED FROM ITS BID PRICE THE COST OF THE FLOCKING, AND, THEREFORE, ITS BID SHOULD HAVE BEEN $264.50 PER UNIT. PURSUANT TO A SUBSEQUENT TELEPHONIC REQUEST BY THE PROCURING ACTIVITY FOR DETAILS AS TO THE ALLEGED MISTAKE, WHICH WAS NOT APPARENT FROM THE BID, BEAVER FURNISHED ADDITIONAL INFORMATION IN A LETTER, ALSO DATED MARCH 9, AND REQUESTED THAT IT BE EXCUSED FROM PERFORMING THE CONTRACT AT ITS BID PRICE. THE INFORMATION FURNISHED BY BEAVER WITH ITS LETTER, WHICH INCLUDED A PRICE LIST COPYRIGHTED BY EQUIPTO IN 1963, ENABLED THE CONTRACTING OFFICER TO MAKE AN ANALYSIS OF BEAVER'S BID PRICE AND ITS CORRECTED BID PRICE AS FOLLOWS:

CHART

"BID PRICE CORRECTED PRICE

COST OF BASIC DRAWER UNIT $191.45 $191.45

COST OF NYLON FLOCKING OF EACH UNIT - 0 - 31.50

TRANSPORTATION TO CAPE KENNEDY 16.50 16.50

COST TO DEALER $207.95 $239.85

PROFIT (NOMINAL 10 PERCENT) 24.05 24.65

TOTAL $232.00 $264.50"

IN HIS REVIEW OF THE PROCUREMENT, THE CONTRACTING OFFICER REQUESTED THE OTHER TWO BIDDERS TO VERIFY THEIR BIDS. THE RESULT WAS AN ALLEGATION OF MISTAKE BY GONDAS AND A CONFIRMATION FROM EQUIPTO.

GONDAS ADVISED THAT, LIKE BEAVER, IT HAD FAILED TO INCLUDE IN ITS BID PRICE A CHARGE FOR THE FLOCKING, AND IT FURNISHED AN ORIGINAL WORKSHEET SHOWING THE SAME BASIC DEALER COST AS BEAVER HAD LISTED, $191.45, PLUS A MARKUP OF $23.93 AND FREIGHT COSTS OF $18.00, MAKING A TOTAL UNIT PRICE OF $233.38. ACCORDINGLY, GONDAS REQUESTED WITHDRAWAL OF ITS BID.

EQUIPTO, WHO HAD FURNISHED WITH ITS BID DESCRIPTIVE LITERATURE BEARING A 1964 COPYRIGHT SHOWING THAT THE NYLON FLOCKING, DESCRIBED BY EQUIPTO AS "VELVET SOFT COATING," WAS OPTIONAL, AS WERE THE SCOOP FRONT INSERT PRESCRIBED IN THE IFB AND THE HEAVIER PANELS, GAVE THE FOLLOWING BREAKDOWN OF ITS PRICE TO DEALERS FOR THE ITEM REQUIRED BY THE IFB:

CHART

"COST PRICE OF DRAWER UNIT NO. 3966 ------------------------- $191.45

COST PRICE OF CURVED INSERT, FLOCKING OF INTERIOR OF EACH

DRAWER AND ITS DIVIDERS -------------------------------------- $ 34.30

COST OF HEAVIER SIDE AND BACK PANEL -------------------------- $ 10.00

TOTAL -------------------------------------------------------- $235.75

**ESTIMATED COST OF FREIGHT FROM AURORA, ILL. TO CAPE

KENNEDY ------------------------------------------------------ $ 23.00

TOTAL COST TO DEALERS ---------------------------------------- $258.75

**COST OF FREIGHT DEPENDENT ON TOTAL WEIGHT AND METHOD SHIPMENT USED BY THE INDIVIDUAL DEALER.'

IN ADDITION, EQUIPTO STATED THAT MANY WHOLESALER AND DISTRIBUTOR PERSONNEL WERE NOT FAMILIAR WITH THE PRICE STRUCTURE FOR THE "FLOCKING," A PROCESS WHICH WAS INTRODUCED TO THE INDUSTRY IN NOVEMBER 1964.

FURTHER INVESTIGATION BY THE PROCURING ACTIVITY DISCLOSED THAT WHILE NEITHER OF THE DEALER BIDDERS HAD ALLEGED ERROR PRIOR TO AWARD, A REPRESENTATIVE OF EQUIPTO HAD EXPRESSED CONCERN TO A SUPPLY CLERK AT THE USING ACTIVITY ABOUT THE POSSIBILITY OF A MISTAKE IN THE QUOTATIONS BY THE DEALERS. WHILE IT DOES NOT APPEAR THAT THE SUPPLY CLERK, WHO WAS NOT ON THE CONTRACTING OFFICER'S STAFF, COMMUNICATED THE MANUFACTURER'S REMARK TO THE CONTRACTING OFFICER, IT IS ACKNOWLEDGED BY THE CONTRACTING OFFICER THAT THE DISPARITY BETWEEN THE PRICES QUOTED BY THE DEALERS AND BY THE MANUFACTURER WAS NOTED DURING AN ENSUING DISCUSSION BETWEEN THE CONTRACTING OFFICER AND THE SUPPLY CLERK, AND SUCH DISPARITY WAS ATTRIBUTED TO "THE GENERAL PRACTICE OF MANUFACTURERS PROTECTING THE COMPETITIVE PRICES OF THEIR DEALERS.'

IT IS THE POSITION OF THE CONTRACTING OFFICER THAT SINCE HE WAS NOT ON NOTICE, ACTUAL OR CONSTRUCTIVE, OF ANY MISTAKE IN THE LOW BID BEFORE THE AWARD, THE DISPARITY IN BID PRICES BEING SLIGHT, THE CONTRACT MUST BE CONSIDERED AS BINDING. THEREFORE, IN HIS OPINION, BEAVER SHOULD BE REQUIRED TO PERFORM AT ITS BID PRICE.

IT IS THE POSITION OF THE DIRECTOR OF PROCUREMENT, HOWEVER, THAT THERE WAS A MUTUAL MISTAKE OF FACT, AND, THEREFORE, THE CONTRACT IS UNENFORCEABLE. THE BASIS FOR THE DIRECTOR'S VIEW IS THAT THE USE OF THE TERM "NYLON FLOCKING" IN THE IFB IN LIEU OF THE WORDS "VELVET SOFT COATING" SHOWN IN EQUIPTO'S SALES LITERATURE WAS MISLEADING AND THEREBY CONSTITUTED A MATERIAL DEFECT IN THE IFB WHICH UNDOUBTEDLY CONTRIBUTED TO THE ERROR IN BEAVER'S BID. IT IS ALSO POINTED OUT THAT THE NYLON FLOCKING IS AN OPTIONAL EXTRA ITEM AND NOT A TRUE SALIENT CHARACTERISTIC, AS STATED IN THE IFB. ACCORDINGLY, THE DIRECTOR REQUESTS OUR APPROVAL OF CANCELLATION OF THE CONTRACT AND READVERTISEMENT OF THE PROCUREMENT UNDER SPECIFICATIONS LEAVING NO DOUBT AS TO THE GOVERNMENT'S ACTUAL REQUIREMENTS.

THE RULE IS WELL ESTABLISHED THAT IT IS THE DUTY OF ADMINISTRATIVE OFFICIALS CHARGED WITH THE RESPONSIBILITY OF DRAFTING SPECIFICATIONS ISSUED PURSUANT TO THE PUBLIC ADVERTISING STATUTES TO SEE THAT THEY ARE SO DRAWN AS TO STATE THE ACTUAL MINIMUM NEEDS OF THE GOVERNMENT CLEARLY, FAIRLY, AND ACCURATELY. 33 COMP. GEN. 567, 570. CONSISTENT THEREWITH, OUR OFFICE HAS HELD THAT IN SITUATIONS IN WHICH BIDDERS HAVE BEEN MISLED BY THE LANGUAGE OF AN INVITATION FOR BIDS WITH THE RESULT THAT THEIR BIDS HAVE NOT BEEN PREPARED AND SUBMITTED ON A COMMON BASIS, AN AWARD UNDER SUCH INVITATION VIOLATES THE PROCUREMENT STATUTES AND SHOULD BE CANCELED AND THE PROCUREMENT READVERTISED UNDER DEFINITE SPECIFICATIONS WHICH WILL ALLOW ALL INTERESTED BIDDERS TO COMPETE EQUALLY. 43 COMP. GEN. 544 AND CASES CITED THEREIN.

FROM THE 1964 SALES LITERATURE WHICH ACCOMPANIED EQUIPTO'S BID AND FROM THE INFORMATION SUPPLIED BY EQUIPTO AFTER AWARD, IT IS CLEAR THAT THE FLOCKING, THE SCOOP FRONT INSERT, AND THE EXTRA HEAVY SIDE AND BACK PANELS REQUIRED BY THE SPECIFICATIONS WERE OPTIONAL FEATURES NOT INCLUDED IN THE BASIC BRAND NAME ITEM AND OBTAINABLE ONLY AT EXTRA COST. ACCORDINGLY, SUCH FEATURES WERE IMPROPERLY DESIGNATED IN THE IFB AS SALIENT CHARACTERISTICS OF THE BRAND NAME ITEM, AND IT APPEARS THAT SUCH DEFECT IN THE IFB MAY HAVE MISLED THE TWO LOW DEALER BIDDERS TO ASSUME THAT THE PROCUREMENT NEED WAS FOR A STANDARD OR BASIC ITEM OBTAINABLE FROM THE MANUFACTURER AT ITS 1963 LIST PRICE OF $191.45, ON WHICH THEY BASED THEIR BIDS. ADDITIONALLY, IT IS OUR OPINION THAT, IN VIEW OF THE SPECIAL FEATURES WHICH WERE TO BE ADDED TO THE STANDARD "BRAND NAME" ITEM, AND IN THE ABSENCE OF DEFINITE KNOWLEDGE THAT IT WAS THE POLICY OF EQUIPTO OR THE ESTABLISHED PRACTICE WITHIN THE INDUSTRY TO PROTECT THE COMPETITIVE PRICES OF DEALERS, IT WAS INCUMBENT UPON THE CONTRACTING OFFICER TO REQUEST VERIFICATION OF THE LOW BID PRICE.

IN VIEW OF THE FOREGOING, IT WOULD APPEAR TO BE EXTREMELY QUESTIONABLE WHETHER THE AWARD TO BEAVER RESULTED IN A VALID AND ENFORCEABLE CONTRACT. ACCORDINGLY, WE CONCUR WITH THE PROPOSAL OF THE DIRECTOR TO CANCEL THE CONTRACT WITH BEAVER AND TO READVERTISE THE PROCUREMENT UNDER SPECIFICATIONS WHICH CLEARLY SET FORTH THE GOVERNMENT'S NEEDS.

THE FILE FORWARDED BY THE DIRECTOR OF PROCUREMENT IS RETURNED AS REQUESTED.