B-161037, MAR. 27, 1967

B-161037, MAR. 27, 1967

TO ADMINISTRATOR OF VETERANS AFFAIRS:

REFERENCE IS MADE TO A LETTER DATED MARCH 8, 1967, WITH ENCLOSURES, REFERENCE 134G, FROM THE DIRECTOR, SUPPLY SERVICE, REQUESTING OUR DECISION WHETHER RELIEF MAY BE GRANTED TO LEO LINDEN LABORATORIES, INC., (LEO LINDEN) FOR AN ALLEGED MISTAKE IN BID BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER AFTER ACCEPTANCE OF LEO LINDEN'S BID UNDER INVITATION FOR BIDS M5-19-67, DATED JANUARY 13, 1967.

LEO LINDEN, IN RESPONSE TO ITEM NO. 8 OF THE INVITATION OFFERED TO SUPPLY 1,800 UNITS OF CODEINE PHOSPHATE TABLETS, USP, 60-65 MG. (1 GR.) 100-S, HYPO-TYPE, AT A UNIT PRICE OF $2.21, WHICH WAS THE LOW BID. THE ONLY OTHER BID RECEIVED ON THIS ITEM WAS SUBMITTED BY THE MERRILL COMPANY IN THE AMOUNT OF $4.23 PER UNIT. AWARD WAS MADE TO LEO LINDEN AND PURCHASE ORDER NO. 67-MC-50232, IN THE AMOUNT OF $3,978, WAS ISSUED ON FEBRUARY 1, 1967. BY LETTER OF FEBRUARY 10, 1967, TO THE CONTRACTING OFFICER, LEO LINDEN ALLEGED THAT IT HAD MADE AN ERROR IN ITS BID. THE REASON GIVEN FOR THE ERROR WAS A MISUNDERSTANDING AS TO THE TYPE OF TABLETS CALLED FOR IN THE INVITATION. LEO LINDEN STATED THAT ITS BID WAS FOR COMPRESSED TYPE TABLETS RATHER THAN HYPODERMIC TYPE AS CALLED FOR BY THE INVITATION, AND THAT IT DOES NOT EVEN HAVE THE NECESSARY TYPE OF EQUIPMENT TO MANUFACTURE HYPODERMIC TYPE TABLETS. LEO LINDEN FURTHER STATED THAT IT HAD PREVIOUSLY RECEIVED A REQUEST FOR A QUOTATION ON THE COMPRESSED TYPE TABLETS AND WAS GUIDED BY THIS PREVIOUS REQUEST WHEN IT SUBMITTED ITS PRESENT BID. LEO LINDEN REQUESTED THAT IT BE RELIEVED FROM THE RESPONSIBILITY OF FILLING THIS ORDER.

THE CONTRACTING OFFICER HAS RECOMMENDED THAT THE CONTRACT BE CANCELLED, SINCE THE LEO LINDEN BID WAS ACTUALLY 31 PERCENT LOWER THAN THE PRICE PREVIOUSLY PAID FOR THE SAME ITEM AND 48 PERCENT LOWER THAN THE BID PRICE OF THE ONLY OTHER BIDDER.

WHERE A MISTAKE IN BID IS ALLEGED AFTER ITS ACCEPTANCE, THE PRIMARY QUESTION IS WHETHER THE ACCEPTANCE CONSUMMATED A VALID AND BINDING CONTRACT. IN THE ABSENCE OF NOTICE, EITHER ACTUAL OR CONSTRUCTIVE, IMPUTABLE TO THE CONTRACTING OFFICER, THAT THE BID WAS PROBABLY ERRONEOUS, HIS ACCEPTANCE THEREOF IN GOOD FAITH WOULD CONVERT THE BIDDER'S EXPRESSED OFFER INTO A LEGAL OBLIGATION TO PERFORM IN ACCORDANCE WITH HIS OFFER. SEE 39 COMP. GEN. 36. HOWEVER, THE CONTRACTING OFFICER IS CHARGED WITH THE RESPONSIBILITY OF DETERMINING THE REASONABLENESS OF THE BID PRICE (SEE SUBPART 1-2.404-2 (C) OF THE FEDERAL PROCUREMENT REGULATIONS), AND THE RECORD INDICATES THAT THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN THAT THE LEO LINDEN BID PRICE WAS SUBSTANTIALLY LOWER THAN THE PRICE PREVIOUSLY PAID FOR THE SAME ITEM.

IT IS OUR OPINION THAT THE 48 PERCENT DIFFERENCE BETWEEN THE LEO LINDEN BID AND THAT OF THE ONLY OTHER BIDDER, VIEWED IN CONJUNCTION WITH THE FACT THAT THE LEO LINDEN BID WAS 31 PERCENT LOWER THAN THE PRICE PREVIOUSLY PAID FOR THE SAME ITEM, IS SUFFICIENT TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF THE ERROR. HIS ACCEPTANCE OF THE BID, THEREFORE, DID NOT RESULT IN A VALID AND BINDING CONTRACT. SEE B-157281, AUGUST 2, 1965, B-154411, JUNE 24, 1964. ACCORDINGLY, THE CONTRACT MAY BE CANCELLED AS RECOMMENDED BY THE CONTRACTING OFFICER.