B-160113, NOV. 25, 1966

B-160113: Nov 25, 1966

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GENERAL SERVICES ADMINISTRATION: REFERENCE IS MADE TO LETTERS OF SEPTEMBER 20 AND NOVEMBER 3. ALLEGES IT MADE IN ITS BID UPON WHICH THE SALES CONTRACT UNDER INVITATION GS-02-U/R/-26DAB WAS AWARDED. THE PROPERTY WAS DESCRIBED BY METES AND BOUNDS AND WAS STATED TO CONTAIN ABOUT 2.95 ACRES OF LAND. THE OFFERING FOR SALE WAS LARGELY AIR RIGHTS OVER THE LAND. THE ONLY BID THE GOVERNMENT RECEIVED ON THAT OFFERING WAS ONE FROM STANLEY J. THIS BID WAS SUBJECT TO A CONDITION. THIS WAS DISCLOSED TO MR. HARTE AND HE WAS PROVIDED WITH AN OPPORTUNITY TO SUBMIT AN INCREASED. NO AWARD WAS MADE. THE OFFERING WAS MADE A SECOND TIME IN NOVEMBER 1965. IT WAS CANCELED BEFORE THE BID OPENING DATE IN ORDER TO PERMIT SOME CHANGES TO BE MADE IN THE INVITATION REGARDING THE STEEL DECK TO BE CONSTRUCTED OVER THE PROPERTY.

B-160113, NOV. 25, 1966

TO ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO LETTERS OF SEPTEMBER 20 AND NOVEMBER 3, 1966, FROM THE GENERAL COUNSEL AND DEPUTY ADMINISTRATOR, RESPECTIVELY, FURNISHING INFORMATION AND REQUESTING A DECISION REGARDING AN ERROR NEQUID CORP. ALLEGES IT MADE IN ITS BID UPON WHICH THE SALES CONTRACT UNDER INVITATION GS-02-U/R/-26DAB WAS AWARDED.

THE INVITATION SOLICITED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF A TRACT OF LAND SITUATED IN THE BROOKLYN ARMY TERMINAL. THE PROPERTY WAS DESCRIBED BY METES AND BOUNDS AND WAS STATED TO CONTAIN ABOUT 2.95 ACRES OF LAND. BECAUSE OF RESERVATIONS AND CONDITIONS IN THE INVITATION, THE OFFERING FOR SALE WAS LARGELY AIR RIGHTS OVER THE LAND.

THE SAME OFFERING HAD FIRST BEEN MADE IN MAY 1963. THE ONLY BID THE GOVERNMENT RECEIVED ON THAT OFFERING WAS ONE FROM STANLEY J. HARTE IN THE AMOUNT OF $141,000, BUT THIS BID WAS SUBJECT TO A CONDITION. THE GENERAL SERVICES ADMINISTRATION REGIONAL OFFICE, HOWEVER, HAD OBTAINED AN INDEPENDENT APPRAISAL OF $187,000 AS THE FAIR MARKET VALUE OF THE PROPERTY. THIS WAS DISCLOSED TO MR. HARTE AND HE WAS PROVIDED WITH AN OPPORTUNITY TO SUBMIT AN INCREASED, UNCONDITIONAL BID. MR. HARTE INCREASED HIS BID TO $187,000, BUT BECAUSE OF THE CONDITION IN THE ORIGINAL BID, CARRIED OVER INTO THE INCREASED BID, NO AWARD WAS MADE.

THE OFFERING WAS MADE A SECOND TIME IN NOVEMBER 1965; HOWEVER, IT WAS CANCELED BEFORE THE BID OPENING DATE IN ORDER TO PERMIT SOME CHANGES TO BE MADE IN THE INVITATION REGARDING THE STEEL DECK TO BE CONSTRUCTED OVER THE PROPERTY. JUST PRIOR TO THE SECOND OFFERING, THE APPRAISER WAS REQUESTED TO UPDATE THE ORIGINAL APPRAISAL. HE STATED THAT BASED UPON HIS REVIEW THE MARKET VALUE OF $187,000 REMAINED UNCHANGED.

THE OFFERING WAS MADE FOR THE THIRD TIME IN MARCH 1966 UNDER THE SUBJECT INVITATION. THIS TIME TWO BIDS WERE RECEIVED--- ONE FROM NEQUID CORP. IN THE AMOUNT OF $401,000 AND ANOTHER FROM STANLEY J. HARTE FOR $187,000. APRIL 20, 1966, 5 DAYS AFTER BID OPENING, THE NEQUID HIGH BID WAS ACCEPTED. REPRESENTATIVES OF THE CORPORATION THEREAFTER ORALLY ALLEGED MISTAKE IN BID IN MAY 1966 AND, SUBSEQUENTLY, THE CORPORATION FURNISHED A FORMAL SWORN PRESENTATION EXPLAINING HOW THE ERROR OCCURRED AND REQUESTING RELIEF THEREFROM.

ACCORDING TO THE SWORN STATEMENT OF THE ARCHITECT WHO PREPARED PRELIMINARY INFORMATION FOR THE CORPORATION PRIOR TO ITS BIDDING--- RELYING UPON A SKETCH ATTACHED TO THE INVITATION SHOWING THE LOCATION OF THE PROPERTY AND VISUAL OBSERVATION OF THE PROPERTY ITSELF AS WELL AS REFERENCE TO LOCAL ZONING REQUIREMENTS--- HE DETERMINED THAT TWO 15 STORY HIGH RISE BUILDINGS PROVIDING A TOTAL OF 270-DWELLING UNITS COULD BE ERECTED OVER THE PREMISES AND HE PREPARED A STATISTICAL ANALYSIS AND A SKETCH OF THE PROPOSED PROJECT. ADDITIONAL SWORN STATEMENTS ESTABLISH THAT THE CORPORATION RELIED UPON THE ARCHITECT'S SKETCH AND ANALYSIS OF THE NUMBER OF APARTMENTS THAT COULD BE BUILT UPON THE SITE AND DETERMINED THAT A PRICE OF $390,000 COULD THEREFORE BE PAID FOR THE LAND. ANTICIPATING THAT THERE MIGHT BE OTHER BIDDERS WITH SIMILAR MARKETING IDEAS, THE CORPORATION DECIDED THAT IT WOULD BE ADVANTAGEOUS TO BID $401,000. AFTER THE BID WAS ACCEPTED AND PREPARATORY TO HAVING THE TITLE EXAMINED, THE CORPORATION'S ATTORNEY DISCOVERED THAT THE SKETCH AND ANALYSIS PREPARED BY THE ARCHITECT VARIED SUBSTANTIALLY FROM THE METES AND BOUNDS DESCRIPTION IN THE INVITATION FOR BIDS. IT WAS DISCOVERED THAT THE ARCHITECT HAD NOT CONSIDERED THE RESERVATIONS AND CONDITIONS OF THE INVITATION FOR BIDS AND, AS A RESULT, HAD FAILED TO TAKE INTO ACCOUNT THE FACT THAT A GOOD PART OF THE LAND ACTUALLY WAS IN THE BED OF THE ADJOINING STREET. HENCE, IT WAS DETERMINED THAT NO MORE THAN 180 APARTMENTS COULD BE CONSTRUCTED ON THE SITE AND THAT THEY WOULD NOT BE MARKETABLE IN VIEW OF THE RENT WHICH WOULD HAVE TO BE CHARGED BECAUSE OF THE COST OF THE PROPERTY.

THE CONTRACTING OFFICER DENIED THE REQUEST FOR RELIEF. THE BASIS OF THE DENIAL WAS THAT HE DID NOT HAVE ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF MISTAKE. WHILE HE ACKNOWLEDGED THAT HE HAD AN APPRAISAL OF VALUE OF THE PROPERTY, HE STATED THAT AN APPRAISAL IS MERELY AN OPINION OF VALUE AND THAT, AS REAL PROPERTY IS UNIQUE, THE VALUE MAY VARY AMONG PROSPECTIVE PURCHASERS. THEREFORE, HE REASONED THAT THE DISPARITY BETWEEN APPRAISED VALUES AND BID PRICES WAS NOT SUFFICIENT TO IMPUTE NOTICE OF POSSIBILITY OF MISTAKE. IN SUPPORT THEREOF, HE POINTS OUT THAT IN 12 OTHER SALES OF SURPLUS REAL PROPERTY, THE SALES PRICES WERE IN SOME INSTANCES AS MUCH AS TWO, THREE AND, IN ONE CASE, SEVEN TIMES MORE THAN THE APPRAISED VALUE. CONVERSELY, HE CITES THREE INSTANCES WHERE THE REAL PROPERTY SOLD AT A HALF, A THIRD AND A FOURTH OF THE APPRAISED VALUE.

THE SEPTEMBER 20 LETTER TO OUR OFFICE SUPPORTED THE CONTRACTING OFFICER'S POSITION. IT STATED THAT BECAUSE OF THE MYRIAD USES TO WHICH LAND CAN BE DEDICATED AND THE WIDE RANGE OF PURPOSES FOR WHICH IT IS ACQUIRED, FOR EXAMPLE AS SPECULATION, EXPLORATION, DEVELOPMENT OR TAX AVOIDANCE, A CONTRACTING OFFICER CANNOT BE SAID TO BE ON NOTICE OF ERROR BECAUSE OF A DISPARITY BETWEEN BID PRICES AND APPRAISALS. IT IS POINTED OUT THAT OUR OFFICE HAS RECOGNIZED THESE PRINCIPLES WITH REGARD TO SALES OF SURPLUS PERSONAL PROPERTY AND IT IS SUGGESTED THAT THEY ARE APPLICABLE TO DISPOSALS OF SURPLUS REAL PROPERTY AS WELL.

IT IS TRUE THAT ORDINARILY A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT DEEMED TO BE CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE SURPLUS PROPERTY MAY BE PUT. IT MAY BE TOO THAT AN APPRAISAL OF VALUE OF REAL ESTATE IS NOT ALWAYS A RELIABLE CRITERION OF THE VALUE OF THE REAL PROPERTY INVOLVED. HOWEVER, THE APPRAISAL IN THIS CASE WAS NOT A MERE STATEMENT OF THE VALUE OF THE PROPERTY INVOLVED. AS A PART OF THE APPRAISAL, THERE WAS A STATEMENT FROM THE APPRAISER ANALYZING THE USE TO WHICH THE PROPERTY COULD BE PUT. THIS STATEMENT INDICATED THAT THE APPRAISER HAD INVESTIGATED THE POSSIBILITY OF THE PROPERTY BEING USED FOR EITHER A COMMERCIAL OR RESIDENTIAL BUILDING AND HAD DETERMINED BOTH TO BE UNFEASIBLE. THE STATEMENT INDICATES FURTHER THAT THE PROPERTY WOULD PROBABLY HAVE NO VALUE TO ANYONE OTHER THAN THE IMMEDIATELY ADJACENT LANDOWNER--- THE OTHER BIDDER--- WHO THE STATEMENT SAID WAS INTERESTED IN THE PROPERTY FOR PLOTTAGE AND ADDITIONAL STREET FRONTAGE FOR A HIGH RISE APARTMENT COMPLEX IT DESIRED TO BUILD NEXT TO IT.

PERHAPS THE APPRAISAL OF LAND VALUE ALONE WOULD NOT HAVE BEEN SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF THE POSSIBILITY OF MISTAKE. HOWEVER, THE APPRAISAL VALUE OF THE PROPERTY WAS COUPLED WITH THE APPRAISER'S STATEMENT OF THE LIMITED USE OF THE PROPERTY AND THE ONLY INTERESTED BIDDER THE APPRAISER INDICATED WOULD HAVE ANY REASON FOR PURCHASING THE PROPERTY WAS NOT OFFERING MORE THAN THE APPRAISED VALUE. CONSIDERING THESE ADDITIONAL FACTORS, THE CONTRACTING OFFICER SHOULD HAVE BEEN PLACED ON NOTICE OF THE POSSIBILITY OF MISTAKE IN THE HIGH BID AND, THEREFORE, SHOULD HAVE SOUGHT CONFIRMATION OF THE BID BEFORE AWARD.

ACCORDINGLY, AND SINCE A BONA FIDE MISTAKE APPEARS TO HAVE OCCURRED, THE CONTRACT WHICH SHOULD NOT HAVE BEEN AWARDED WITHOUT BID VERIFICATION SHOULD BE RESCINDED. WE THEREFORE BELIEVE THAT THE DEPOSIT ACCOMPANYING THE BID SHOULD BE REFUNDED TO THE PURCHASER.

THE DOCUMENTS FURNISHED OUR OFFICE FOR CONSIDERATION OF THE CASE ARE RETURNED AS REQUESTED.