B-159042, JUN. 27, 1966

B-159042: Jun 27, 1966

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VETERANS ADMINISTRATION: REFERENCE IS MADE TO THE LETTER DATED APRIL 26. THE ABOVE REFERENCED SOLICITATION WAS ISSUED ON JULY 29. NEGOTIATIONS WERE CONDUCTED PURSUANT TO THE AUTHORITY IN SECTION 302 (C) (7) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949. SOUTHWESTERN ALLEGES THAT IT SUBMITTED ITS OLD PRICE LIST IN THE MISTAKEN BELIEF THAT INASMUCH AS THE CONTRACT WAS NOT TO BEGIN FOR SEVERAL MONTHS IT WOULD BE ALLOWED TO MAKE CORRECTIONS AFTER ACCEPTANCE FOR CHANGED PRICES DUE TO INCREASES IN MANUFACTURERS' PRICES. AWARDS WERE MADE TO SOUTHWESTERN AND THE FIVE MANUFACTURERS COVERING THE SAME PRODUCTS AND THE SAME TIME PERIOD. SOUTHWESTERN CLAIMS IT SHOULD BE PERMITTED TO AMEND ITS PRICE LIST BECAUSE THE CONTRACTING OFFICER HAD NOTICE OF ITS MISTAKE IN THAT HE SHOULD HAVE REALIZED THAT A DISTRIBUTOR CANNOT SELL A PRODUCT FOR LESS THAN THE MANUFACTURER CAN SELL IT.

B-159042, JUN. 27, 1966

TO THE ADMINISTRATOR, VETERANS AFFAIRS, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO THE LETTER DATED APRIL 26, 1966, FROM THE DIRECTOR, SUPPLY MANAGEMENT SERVICE, VETERANS ADMINISTRATION, YOUR REFERENCE 074B, CONCERNING THE ALLEGED MISTAKE IN BID BY SOUTHWESTERN DRUG CORPORATION, DALLAS, TEXAS, IN RESPONSE TO SOLICITATION FOR OFFERS NO. 7023-MS-1-66, FSC GROUP 65, PART I, SECTION B, ISSUED BY THE VETERANS ADMINISTRATION.

THE ABOVE REFERENCED SOLICITATION WAS ISSUED ON JULY 29, 1965, AND CONTEMPLATED MULTIPLE AWARDS FOR VARIOUS DRUG AND PHARMACEUTICAL PRODUCTS FOR THE CONTRACT PERIOD JANUARY 1, 1966, THROUGH DECEMBER 31, 1968. NEGOTIATIONS WERE CONDUCTED PURSUANT TO THE AUTHORITY IN SECTION 302 (C) (7) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 377, WITH MANUFACTURERS OF THE DRUGS BEING SOLICITED, AS WELL AS THE PROTESTANT, A DISTRIBUTOR OF THESE DRUGS. SOUTHWESTERN HELD A SIMILAR CONTRACT FOR THE PERIOD JANUARY 1, 1963 THROUGH DECEMBER 31, 1965, AND SUBMITTED A PRICE LIST FOR THE NEW CONTRACT IDENTICAL TO THE ONE IT USED UNDER THE PREVIOUS CONTRACT. THE CONTRACTING OFFICER ALSO HAD PRICE LISTS FROM THE MANUFACTURERS OF THE PRODUCTS WHICH QUOTED HIGHER PRICES THAN SOUTHWESTERN'S BID. SOUTHWESTERN ALLEGES THAT IT SUBMITTED ITS OLD PRICE LIST IN THE MISTAKEN BELIEF THAT INASMUCH AS THE CONTRACT WAS NOT TO BEGIN FOR SEVERAL MONTHS IT WOULD BE ALLOWED TO MAKE CORRECTIONS AFTER ACCEPTANCE FOR CHANGED PRICES DUE TO INCREASES IN MANUFACTURERS' PRICES. AWARDS WERE MADE TO SOUTHWESTERN AND THE FIVE MANUFACTURERS COVERING THE SAME PRODUCTS AND THE SAME TIME PERIOD. SOUTHWESTERN CLAIMS IT SHOULD BE PERMITTED TO AMEND ITS PRICE LIST BECAUSE THE CONTRACTING OFFICER HAD NOTICE OF ITS MISTAKE IN THAT HE SHOULD HAVE REALIZED THAT A DISTRIBUTOR CANNOT SELL A PRODUCT FOR LESS THAN THE MANUFACTURER CAN SELL IT.

AS NOTED ABOVE, THE ONLY MISTAKE MADE BY SOUTHWESTERN WAS ITS BELIEF THAT IT WOULD BE ALLOWED TO AMEND ITS PRICE LIST AFTER IT WAS ACCEPTED. THERE IS NO DOUBT SOUTHWESTERN INTENDED TO SUBMIT THE OLD PRICE LIST. WITHOUT CATEGORIZING AS TO THE TYPE OF MISTAKE INVOLVED IN THE CASE, WE FEEL THE CONTRACTING OFFICER HAD CONSTRUCTIVE, IF NOT ACTUAL NOTICE OF AN ERROR IN SOUTHWESTERN'S BID SINCE HE HAD PRICE LISTS FROM THE MANUFACTURERS OF THE PRODUCTS WHICH QUOTED HIGHER PRICES THAN DID SOUTHWESTERN'S BID. CONTRACTING OFFICER SHOULD REALIZE THAT A DISTRIBUTOR CANNOT SELL A PRODUCT FOR LESS THAN THE MANUFACTURER CAN SELL IT, AND WE BELIEVE HE SHOULD HAVE ASKED SOUTHWESTERN TO VERIFY ITS BID, WHICH WOULD, IN ALL LIKELIHOOD, HAVE DISCLOSED SOUTHWESTERN'S MISTAKEN BELIEF.

GENERALLY, REFORMATION OF A CONTRACT IS NOT PERMITTED UNLESS THE CONTRACTOR CAN SHOW BY CLEAR AND CONVINCING EVIDENCE WHAT HE INTENDED TO BID. HERE, SOUTHWESTERN CANNOT SHOW THIS INASMUCH AS IT DID NOT KNOW, WHEN IT SUBMITTED THE BID, WHAT THE MANUFACTURERS' PRICES WOULD BE AND, THUS, HAD NOTHING UPON WHICH TO BASE ITS BID. THEREFORE, AN ADJUSTMENT IN THE CONTRACT PRICE IS NOT POSSIBLE IN THIS CASE.

HOWEVER, IN VIEW OF THE FACT THE CONTRACTING OFFICER HAD AT LEAST CONSTRUCTIVE NOTICE OF THE ERROR IN SOUTHWESTERN'S BID AND DID NOT ATTEMPT TO VERIFY IT, AND, BECAUSE SOUTHWESTERN SEEMS TO HAVE ACTED IN GOOD FAITH FROM THE OUTSET, WE FEEL IT WOULD BE UNCONSCIONABLE TO REQUIRE SOUTHWESTERN TO PERFORM UNDER THE PRICES IT BID. SEE B-138570, MARCH 10, 1959.