B-160869, APR. 4, 1967

B-160869: Apr 4, 1967

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TO ADMINISTRATOR OF VETERANS AFFAIRS: REFERENCE IS MADE TO CORRESPONDENCE. IT IS ASKED WHETHER REFORMATION OF SUCH CONTRACTS IS AUTHORIZED BY SECTION 1-2.406-4 OF THE FEDERAL PROCUREMENT REGULATIONS. THE FACTS GIVING RISE TO THE QUESTION ARE AS FOLLOWS: TWO NEGOTIATED CONTRACTS RESULTED FROM THE ACCEPTANCE BY THE CONTRACTORS OF OFFERS MADE BY THE VETERANS ADMINISTRATION BASED UPON QUOTATIONS GIVEN BY THE CONTRACTORS. AFTER THE CONTRACT HAD BEEN ACCEPTED MISTAKE WAS ALLEGED BY BOTH CONTRACTORS. ARE COVERED BY THAT SECTION OR SECTION 1-3.104 OF THE FEDERAL PROCUREMENT REGULATIONS. AUTHORITY TO ADMINISTRATIVELY REFORM OR RESCIND CONTRACTS FOR MISTAKE DISCOVERED AFTER AWARD WAS GRANTED TO THE ADMINISTRATOR.

B-160869, APR. 4, 1967

TO ADMINISTRATOR OF VETERANS AFFAIRS:

REFERENCE IS MADE TO CORRESPONDENCE, 134G, DATED FEBRUARY 7, 1967, FROM THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, SUBMITTING FOR CONSIDERATION THE REQUESTS OF TEAGUE HARDWARE, MONTGOMERY, ALABAMA, AND THE NOLAND COMPANY, ROANOAKE, VIRGINIA, FOR REFORMATION OF CONTRACTS WITH THE VETERANS ADMINISTRATION. THE LETTER OF FEBRUARY 7, 1967, PRESENTS THE QUESTION WHETHER THERE CAN BE ADMINISTRATIVE REFORMATION OF NEGOTIATED CONTRACTS BASED UPON DISCOVERY AFTER THE MAKING OF SUCH CONTRACTS OF MISTAKES IN QUOTATIONS MADE BY THE CONTRACTORS PURSUANT TO STANDARD FORM 18 "REQUEST FOR QUOTATIONS," FEDERAL PROCUREMENT REGULATIONS SECTION 1-16.201. IN PARTICULAR, IT IS ASKED WHETHER REFORMATION OF SUCH CONTRACTS IS AUTHORIZED BY SECTION 1-2.406-4 OF THE FEDERAL PROCUREMENT REGULATIONS.

THE FACTS GIVING RISE TO THE QUESTION ARE AS FOLLOWS: TWO NEGOTIATED CONTRACTS RESULTED FROM THE ACCEPTANCE BY THE CONTRACTORS OF OFFERS MADE BY THE VETERANS ADMINISTRATION BASED UPON QUOTATIONS GIVEN BY THE CONTRACTORS. AFTER THE CONTRACT HAD BEEN ACCEPTED MISTAKE WAS ALLEGED BY BOTH CONTRACTORS. THESE MISTAKES CONSISTED OF ERRORS IN THE QUOTATIONS UPON WHICH THE GOVERNMENT BASED ITS OFFERS. THESE CONTRACTS MAY BE REFORMED UNDER AUTHORITY GRANTED BY FPR 1-2. 406-4 IF MISTAKES OF THIS NATURE, ERROR IN QUOTATIONS MADE PURSUANT TO STANDARD FORM 18, ARE COVERED BY THAT SECTION OR SECTION 1-3.104 OF THE FEDERAL PROCUREMENT REGULATIONS.

AUTHORITY TO ADMINISTRATIVELY REFORM OR RESCIND CONTRACTS FOR MISTAKE DISCOVERED AFTER AWARD WAS GRANTED TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, BY OUR DECISION B-130238, FEBRUARY 28, 1957. THIS APPROVAL WAS BASED UPON PRIOR APPROVAL BY THIS OFFICE OF THE EXERCISE OF SUCH AUTHORITY BY THE DEPARTMENT OF THE ARMY. SEE B-123539, JULY 26, 1955. IN THAT CASE THIS OFFICE AUTHORIZED THE DEPARTMENT OF THE ARMY TO ADMINISTRATIVELY RESCIND OR REFORM CONTRACTS WHEN ,EVIDENCE IS CLEAR AND CONVINCING THAT A MISTAKE IN BID OR PROPOSAL WAS MADE BY THE CONTRACTOR * * *.' THIS AUTHORITY AS NOW FOUND IN FPR 1-2.406-4, WAS EXTENDED TO ALL FEDERAL AGENCIES BY OUR DECISION B-130238, AUGUST 1, 1961, TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION. THAT DECISION FURTHER APPROVED THE INCLUSION OF SECTION 1-3.104 IN THE FEDERAL PROCUREMENT REGULATIONS WHICH EXTENDS THE ADMINISTRATIVE AUTHORITY OF SECTION 1-2.406- 4 SPECIFICALLY TO NEGOTIATED CONTRACTS WHEN MISTAKE IS DISCOVERED IN THE CONTRACTOR'S PROPOSAL AFTER AWARD.

SECTIONS 1-2.406-4 AND 1-3.104 OF THE FPR USE ONLY THE TERMS "BID" AND "PROPOSAL.' THESE TERMS MAY WELL BE CONSIDERED BROAD ENOUGH TO INCLUDE A "QUOTATION" MADE BY A CONTRACTOR, PROVIDED SUCH QUOTATION IS AN OFFER WHICH FORMS A CONTRACT WHEN ACCEPTED BY THE GOVERNMENT. HOWEVER, A ,QUOTATION" MADE PURSUANT TO THE STANDARD FORM 18 "REQUEST FOR QUOTATIONS" IS NOT SUCH AN OFFER. STANDARD FORM 18 STATES:

"THIS IS A REQUEST FOR INFORMATION AND QUOTATIONS FURNISHED ARE NOT OFFERS.'

UNDER STANDARD FORM 18 PROCEDURE A CONTRACT COMES INTO EXISTENCE BY THE CONTRACTOR'S ACCEPTANCE OF A PURCHASE ORDER (AN OFFER TO BUY) ISSUED BY THE GOVERNMENT. THUS, THE CONTRACTOR'S QUOTATION" IS NOT, STRICTLY SPEAKING, A BID OR PROPOSAL AS THOSE TERMS ARE USED IN FPR 1 2.406-4 AND FPR 1-3.104. HOWEVER, YOU ARE ADVISED THAT OUR OFFICE HAS NO OBJECTION TO THE EXERCISE OF ADMINISTRATIVE AUTHORITY TO REFORM OR RESCIND CONTRACTS FOR MISTAKES OF THIS NATURE ON THE SAME BASIS AS FOR MISTAKES IN BIDS OR PROPOSALS. THE TWO CASES INVOLVED ARE RETURNED FOR ADMINISTRATIVE CONSIDERATION.