B-162379, OCT. 20, 1967

B-162379: Oct 20, 1967

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ALLEGES MISTAKE IN BID MAY NOT HAVE DELAY IN ALLEGATION OF MISTAKE REGARDED AS PRECLUDING CONSIDERATION OF MISTAKE BY COMPTROLLER GENERAL WHEN DETERMINATION OF VALIDITY OF CLAIM OF GOVERNMENT IS BASED UPON BREACH OF CONTRACT. IN FACT FURTHER ACTION ON SUCH CLAIM WOULD NOT BE WARRANTED WHERE A MISTAKE HAS BEEN MADE AND WHERE CONTRACTING OFFICER SHOULD BE PRESUMED TO HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR AT TIME OF ACCEPTANCE OF BID. TO GENERAL HEDLUND: REFERENCE IS MADE TO A LETTER DATED OCTOBER 5. THE PROCUREMENT OF THE ORIGINAL CONTRACT QUANTITY OF 214 UNITS WAS DETERMINED TO HAVE BEEN MADE AT AN EXCESS COST OF $3. IT WAS CONTENDED THAT AN UNREALISTIC LOW BID WAS SUBMITTED BY MISTAKE.

B-162379, OCT. 20, 1967

CONTRACTS - MISTAKES - CANCELLATION DECISION TO DEFENSE SUPPLY AGENCY CONCERNING CLAIM OF PERMOFLUX CORP. FOR RELIEF FROM EXCESS COSTS ON ACCOUNT OF DEFAULT. A CONTRACTOR WHO, AFTER A DEFAULT TERMINATION OF AN UNPERFORMED CONTRACT AND ASSESSMENT OF EXCESS COSTS, ALLEGES MISTAKE IN BID MAY NOT HAVE DELAY IN ALLEGATION OF MISTAKE REGARDED AS PRECLUDING CONSIDERATION OF MISTAKE BY COMPTROLLER GENERAL WHEN DETERMINATION OF VALIDITY OF CLAIM OF GOVERNMENT IS BASED UPON BREACH OF CONTRACT. IN FACT FURTHER ACTION ON SUCH CLAIM WOULD NOT BE WARRANTED WHERE A MISTAKE HAS BEEN MADE AND WHERE CONTRACTING OFFICER SHOULD BE PRESUMED TO HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR AT TIME OF ACCEPTANCE OF BID. IN THIS CASE ASBCA DENIED APPEAL BASED UPON EXCUSABLE CAUSES AND DISMISSED CLAIM OF MISTAKE BECAUSE IT HAD NO AUTHORITY TO GRANT RELIEF. CASE COMES WITHIN UNIVERSAL TRANSITOR PRODUCTS CORP. V. U.S., 214 F.SUPP. 486 (1963).

TO GENERAL HEDLUND:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 5, 1967, DSAH-G, FROM THE ASSISTANT COUNSEL, REPORTING ON THE REQUEST OF THE PERMOFLUX CORPORATION, GLENDALE, CALIFORNIA, FOR RELIEF FROM AN ASSESSMENT OF EXCESS COSTS IN THE AMOUNT OF $3,445.48 ON ACCOUNT OF THAT COMPANY'S DEFAULT UNDER CONTRACT NO. DSA 9-27947, DATED MARCH 2, 1966.

THE CONTRACT PROVIDED FOR THE DELIVERY OF 214 LS-116/U LOUDSPEAKERS AT A PRICE OF $21.60 EACH. AFTER TERMINATION OF THE CONTRACT FOR DEFAULT ON OCTOBER 5, 1966, THE GOVERNMENT PURCHASED 218 LOUDSPEAKERS FROM ANOTHER CONTRACTOR AT A UNIT PRICE OF $37.63. WITH THE CONSIDERATION OF PROMPT PAYMENT DISCOUNT OFFERS IN THE ORIGINAL AND THE REPLACEMENT CONTRACTS, THE PROCUREMENT OF THE ORIGINAL CONTRACT QUANTITY OF 214 UNITS WAS DETERMINED TO HAVE BEEN MADE AT AN EXCESS COST OF $3,445.48.

BY LETTER DATED OCTOBER 28, 1966, THE PERMOFLUX CORPORATION PRESENTED AN APPEAL IN REGARD TO THE DEFAULT TERMINATION ACTION. IT WAS CONTENDED THAT AN UNREALISTIC LOW BID WAS SUBMITTED BY MISTAKE, AND THAT THE FAILURE OF THE COMPANY TO PERFORM THE CONTRACT WAS DUE TO EXCUSABLE CAUSES. DECISION ON THE APPEAL WAS RENDERED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS ON MARCH 15, 1967, ASBCA NO. 11992. THE BOARD DENIED THE APPEAL TO THE EXTENT THAT IT WAS BASED UPON ALLEGEDLY EXCUSABLE CAUSES FOR FAILURE TO PERFORM THE CONTRACT, AND DISMISSED THE APPEAL WITH RESPECT TO THE CLAIM OF MISTAKE, STATING THAT THE BOARD HAS UNIFORMLY AND CONSISTENTLY HELD THAT IT HAS NO AUTHORITY TO JUDGE CLAIMS OF, OR GRANT RELIEF FOR, A MISTAKE IN BID.

IN CONNECTION WITH THE AWARD OF THE CONTRACT INVOLVED TO THE PERMOFLUX CORPORATION, THE RECORD INDICATES THAT THREE BIDS WERE RECEIVED ON FIVE SPECIFIED QUANTITY RANGES, AND THAT THE QUOTED UNIT PRICES FOR LOUDSPEAKERS WITHIN THE QUANTITY RANGE OF 201 TO 300 UNITS WERE $21.60, $31.74 AND $42.20. BASED UPON A COMPARISON OF SUCH PRICES AND A REFERENCE TO PRICES PAID BY THE GOVERNMENT ON PREVIOUS PURCHASES OF SIMILAR EQUIPMENT, IT IS CONSIDERED BY YOUR AGENCY THAT THE CONTRACTING OFFICER SHOULD HAVE REQUESTED A VERIFICATION OF THE PRICE OF $21.60 WHICH WAS QUOTED BY THE PERMOFLUX CORPORATION.

HOWEVER, THE CONTRACTOR DID NOT ALLEGE ANY MISTAKE IN BID PRIOR TO THE FILING OF THE APPEAL IN REGARD TO THE TERMINATION OF THE CONTRACT FOR DEFAULT AND, FOR THAT REASON, A DOUBT IS EXPRESSED IN THE LETTER OF OCTOBER 5, 1967, AS TO WHETHER RESCISSION OF THE CONTRACT AND CANCELLATION OF THE NOTICE OF ASSESSMENT OF EXCESS COSTS WOULD BE PROPER IN VIEW OF THE CONCLUSION REACHED BY OUR OFFICE IN THE CASE OF 39 COMP. GEN. 27. IN THAT DECISION IT WAS HELD THAT A CONTRACTOR WHO DID NOT ALLEGE ANY MISTAKE IN BID UNTIL AFTER THE COMPLETION OF CONTRACT DELIVERIES WAS NOT ENTITLED TO ADDITIONAL COMPENSATION BY REASON OF SUCH MISTAKE.

THE CONCLUSION REACHED IN 39 COMP. GEN. 27 DOES NOT APPEAR TO BE RELEVANT TO A SITUATION WHERE, AS HERE, A CONTRACT HAS NOT BEEN PERFORMED AND THE GOVERNMENT HAS MADE A DEMAND FOR PAYMENT OF THE EXCESS COSTS INCURRED IN OBTAINING THE CONTRACT SUPPLIES. THE DEFENSE OF MISTAKE IS AVAILABLE IN A SUIT ON A CONTRACT IF IT IS SPECIALLY PLEADED. 17A, C.J.S. CONTRACTS, SECTION 558. IN SUCH CONNECTION, IT IS APPARENT THAT A DELAY IN ALLEGING A MISTAKE IN BID WOULD NOT PRECLUDE CONSIDERATION OF THE ALLEGED MISTAKE BY OUR OFFICE WHEN DETERMINING THE VALIDITY OF A CLAIM OF THE GOVERNMENT WHICH IS BASED UPON A BREACH OF CONTRACT. IN OUR OPINION, FURTHER ACTION ON ANY SUCH CLAIM ORDINARILY WOULD NOT BE WARRANTED WHERE IT IS CLEAR THAT A SERIOUS MISTAKE IN BID HAD BEEN MADE AND THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO REQUIRE A CONCLUSION THAT THE CONTRACTING OFFICER SHOULD BE PRESUMED TO HAVE BEEN ON CONSTRUCTIVE NOTICE OF THE MISTAKE AT THE TIME OF ACCEPTING THE CONTRACTOR'S BID.

THE FACTS OF THIS CASE ARE SIMILAR IN MOST RESPECTS TO THOSE CONSIDERED IN UNIVERSAL TRANSISTOR PRODUCTS CORP. V. UNITED STATES, E.D.N.Y., 214 F.SUPP. 486 (1963), WHICH INVOLVED A SUIT AGAINST THE UNITED STATES FOR ILLEGALLY TERMINATING A CONTRACT OR, IN THE ALTERNATIVE, FOR RESCISSION OF THE CONTRACT. IN COMMENTING UPON THE PLAINTIFF'S DELAY IN ALLEGING A MISTAKE, THE UNITED STATES DISTRICT COURT STATED:

"A FURTHER QUESTION ARISES AS TO WHETHER AT THIS LATE DATE PLAINTIFF MAY OBTAIN RESCISSION. PLAINTIFF EXCUSES ITS DELAY ON THE GROUND THAT IT DID NOT BECOME AWARE OF THE DISCREPANCY AND THE HISTORY OF THE PRIOR BIDS UNTIL THE LAST BOARD HEARING. WHILE DELAY ALONE IS NOT SUFFICIENT TO BAR THE CLAIM, PREJUDICE TO THE GOVERNMENT RESULTING FROM SUCH DELAY MAY BE A DEFENSE, CF., C.N. MONROE MFG. CO. V. UNITED STATES, E. D. MICH. 1956, 143 F.SUPP. 449. THIS TOO IS A MIXED QUESTION OF LAW AND FACT.'

WE BELIEVE THAT THE SAME RULE IS APPLICABLE TO THIS CASE AND, SINCE THERE IS NO INDICATION THAT THE DELAY OF THE PERMOFLUX CORPORATION IN FURNISHING NOTICE TO THE GOVERNMENT THAT A MISTAKE WAS MADE IN ITS BID CAUSED THE GOVERNMENT TO SUFFER ANY SUBSTANTIAL LOSS OR DAMAGE, THE CONTRACT SHOULD BE RESCINDED.