B-160081, OCT. 10, 1966

B-160081, OCT. 10, 1966

TO ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 15, 1966, WITH ENCLOSURES, SUBMITTING FOR OUR CONSIDERATION AND APPROVAL A REQUEST FOR REFORMATION OF INDEFINITE QUANTITY CONTRACT NO. GS-10S-20285 (ITEM 48), ON THE BASIS OF A MISTAKE IN BID ALLEGED AFTER AWARD BY THE RIVERTON CHEMICAL CORPORATION.

THE INVITATION UPON WHICH THE CONTRACT IS BASED WAS ISSUED ON NOVEMBER 4, 1965, FOR BIDS ON VARIOUS GROUPS OF ITEMS OF PAINT AND LACQUER THINNERS AND DRIERS. ITEM 48 OF GROUP 12 OF THE INVITATION WAS AWARDED ON FEBRUARY 15, 1966, TO THE RIVERTON CHEMICAL CORPORATION AS PART OF AN AGGREGATE AWARD TO IT AS THE LOWEST BIDDER UNDER THE INVITATION.

ON APRIL 25, 1966, THE CONTRACTOR ADVISED THE INVENTORY MANAGEMENT BRANCH, FEDERAL SUPPLY SERVICE, GSA CENTER, AUBURN, WASHINGTON, THAT PURCHASE ORDER AU-S74762 STATED AN OBVIOUSLY ERRONEOUS PRICE OF $0.35 PER UNIT FOR 1,032 ONE GALLON CANS OF RAW LINSEED OIL, ITEM 8010-221 0611, AND THAT ITS ORIGINAL BID PRICE OF $0.35 FOR THIS ITEM WAS ALSO IN ERROR. SUPPORT OF THE ALLEGATION OF ERROR THAT THE PRICE INTENDED WAS $1.70 PER GALLON RATHER THAN $0.35 AS BID, THE CONTRACTOR FURNISHED THE FILE COPY OF ITS BID, ITS WORKSHEETS AND PRICE LIST FOR THE ITEM IN QUESTION. THE CONTRACTOR'S WORKSHEETS SHOW THAT THE PRICE OF $0.35 WAS INCORRECTLY ENTERED AS THE PRICE FOR ONE PINT CANS, WHEREAS THE UNIT PRICE SPECIFIED WAS FOR ONE GALLON CANS. ALSO, ITS PRICE LIST SHOWS A PRICE COMPARISON OF PINT UNITS AND GALLON UNITS WHICH CLEARLY INDICATES THAT THE BID PRICE OF $0.35 ACTUALLY REFLECTS THE PRICE OF A ONE PINT UNIT. FURTHER, THE PRICE QUOTED BY RIVERTON CHEMICAL CORPORATION FOR ITEM 48 IS SUBSTANTIALLY OUT OF LINE WITH THE OTHER BIDS RECEIVED ON THE SAME ITEM. IT IS THE ADMINISTRATIVE VIEW THAT THE DIFFERENCE BETWEEN THE BID OF RIVERTON CHEMICAL COMPANY AND THE NEXT LOW BIDDER ON GROUP 12 ITEMS SHOULD HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF A POSSIBLE MISTAKE IN BID. IS ALSO REPORTED BY THE CONTRACTING OFFICER THAT THE PRICE OF $1.70 IS FACTUAL AND RELIABLE, BASED UPON A PRICE COMPARISON WITH BOILED LINSEED OIL UNDER GROUP 11, ITEM 45 AND COMPARISON OF THE GENERAL PRICE STRUCTURE OF OTHER ITEMS OF BOILED AND RAW LINSEED OIL IN GROUPS 11 AND 12 UNDER THE BID. THE RECONSTRUCTED BID PRICE OF RIVERTON CHEMICAL CORPORATION ON ITEM 48 IS LOWER THAN THE PRICE OF THE NEXT LOWEST ACCEPTABLE BID AS SHOWN BELOW:

CHART

TOTAL AGGREGATE

GROUP 12

RIVERTON CHEMICAL CORP. ORIGINAL

UNIT BID PRICE $0.35 $3,068.58 (NET)

RIVERTON CHEMICAL CORP. CORRECTED

UNIT BID PRICE $1.70 4,143.18 (NET)

PRESERVATION PAINT CO. NEXT ACCEPTABLE

UNIT BID PRICE $1.77 4,187.00

THE PROPOSED ADJUSTED UNIT PRICE OF $1.70 PER GALLON IS CONSIDERED TO BE REASONABLE WHEN COMPARED WITH PRICES OF PREVIOUS PURCHASES WHICH HAVE RANGED FROM $1.79 TO $1.82 PER UNIT. THE CURRENT GSA STOCK STORES CATALOG SELLING PRICE IS REPORTED TO BE $1.75 PER GALLON UNIT.

AS A GENERAL RULE, WHEN A UNILATERAL ERROR IS ALLEGED AFTER AWARD, THE RESULTING 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, AS HERE, THE CIRCUMSTANCES ARE SUCH THAT THE CONTRACTING OFFICER HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR PRIOR TO AWARD. IN SUCH CASES, ACCEPTANCE BY THE CONTRACTING OFFICER DOES NOT RESULT IN A BINDING CONTRACT. SEE 37 COMP. GEN. 706, 707.

WE AGREE THAT A BONA FIDE MISTAKE IN BID WAS MADE AS ALLEGED AND THAT THE DIFFERENCE BETWEEN THE CONTRACTOR'S BID AND THOSE OF THE OTHER BIDDERS WAS SUFFICIENT TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE KNOWLEDGE OF THE ERROR. UNDER THESE CIRCUMSTANCES, A VERIFICATION OF THE BID SHOULD HAVE BEEN REQUESTED BEFORE AWARD.

IN VIEW OF THE FOREGOING, AND SINCE AN ADJUSTMENT OF THE CONTRACT PRICE AS RECOMMENDED WOULD NOT RESULT IN A PRICE FOR THE ITEM IN EXCESS OF THE NEXT LOWEST ACCEPTABLE BID, THE CONTRACT PRICE MAY BE ADJUSTED BY INCREASING THE PRICE ON ITEM 48 FROM $0.35 PER GALLON CAN GO TO $1.70.