B-163515, FEB. 29, 1968

B-163515, FEB. 29, 1968

CONTRACTS - MISTAKES - REFORMATION - JUSTIFICATION DECISION TO VETERANS ADMINISTRATION AUTHORIZING MODIFICATION OF CONTRACT WITH ENERGY GASES, INC. TO INCLUDE DEMURRAGE CHARGES ON GAS CYLINDER. CONTRACTOR WHO FOUR MONTHS AFTER AWARD ALLEGED THAT DEMURRAGE CHARGES HAD BEEN INADVERTENTLY OMITTED FROM BID WHICH ERROR WAS SUBSTANTIATED BY EVIDENCE MAY HAVE CONTRACT MODIFIED ACCORDINGLY SINCE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF ERROR AND HAD BID VERIFIED BEFORE AWARDED.

TO MR. DRIVER:

REFERENCE IS MADE TO LETTER 134G, DATED FEBRUARY 2, 1968, FROM THE DIRECTOR, SUPPLY SERVICE, SUBMITTING FOR OUR CONSIDERATION A REQUEST BY ENERGY GASES INC. (ENERGY), TO MODIFY CONTRACT NO. V5227P420 SO AS TO AUTHORIZE THE PAYMENT OF DEMURRAGE CHARGES ON GAS CYLINDERS WHICH HAD BEEN OMITTED FROM ITS BID UNDER INVITATION FOR BIDS NO. 68-3, ISSUED APRIL 14, 1967, UPON WHICH THE CONTRACT WAS BASED.

THE RECORD INDICATES THAT ENERGY SUBMITTED THE LOW BID OF $3,376.23 IN RESPONSE TO THE INVITATION AND THAT AWARD WAS MADE TO IT FOR ALL ITEMS ON MAY 10, 1967. THREE HIGHER BIDS WERE RECEIVED IN THE AMOUNTS OF $4,047.35, $4,276.15 AND $5,320.68.

BY LETTER DATED SEPTEMBER 26, 1967, THE CLAIMANT ADVISED THE CONTRACTING OFFICER THAT THE DEMURRAGE CHARGES HAD BEEN INADVERTENTLY OMITTED FROM ITS BID. ON DECEMBER 15, 1967, THE CLAIMANT STATED IN THIS RESPECT AS FOLLOWS: "IN REGARD TO OUR CONTRACT TO SUPPLY MEDICAL GASES IN CYLINDERS DATED MAY 9, 1967. THE CONTRACT PERIOD OF JULY 1, 1967 TO JUNE 30, 1968. THIS CONTRACT COVERED THE SPECIAL PROVISION ON CYLINDER DEMURRAGE ON PAGE 6. OUR COPY SHOWS FREE LOAN PERIOD TO BE 30 DAYS AND BEYOND THE FREE LOAN PERIOD DEMURRAGE CHARGES ARE .04 PER DAY PER CYLINDER. "WE APPARENTLY MADE AN ERROR IN NOT INDICATING THIS ON YOUR COPY AND WOULD APPRECIATE A CORRECTION.'

ARTICLE NO. 3 OF THE SPECIAL PROVISIONS OF THE INVITATION, ENTITLED "FREE LOAN PERIOD," REQUESTED BIDDERS TO ADVISE THE PROCURING ACTIVITY OF THE NUMBER OF DAYS THAT IT WOULD BE PERMITTED TO USE TYPE E CYLINDERS WITHOUT CHARGE, AND THE DAILY DEMURRAGE CHARGE FOR EACH CYLINDER, AFTER THE FREE LOAN PERIOD, BY FILLING IN BLANKS AS FOLLOWS:

DEMURRAGE CHARGES TYPE AND SIZE OF CYLINDER FREE LOAN PERIOD BEYOND FREE LOAN PERIOD -------------------------- ----------------- -----------------

E OXYGEN --------- DAYS --------------- PER DAY

E OTHER --------- DAYS --------------- PER DAY

IMMEDIATELY THEREAFTER THE INVITATION INFORMED BIDDERS, IN DETAIL, OF THE MANNER IN WHICH DEMURRAGE CHARGES WOULD BE COMPUTED FOR PAYMENT, USING ILLUSTRATIVE COMPUTATIONS.

THE DIRECTOR, SUPPLY SERVICE, HAS RECOMMENDED THAT THE CONTRACT BE MODIFIED TO PROVIDE FOR THE PAYMENT OF DEMURRAGE IN THE AMOUNT CLAIMED ON THE BASIS THAT THE EVIDENCE SUBMITTED BY ENERGY CONCLUSIVELY SHOWS THAT ITS BID WAS ERRONEOUSLY COMPUTED AND BECAUSE THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF AN ERROR IN THE BID. IN THIS REGARD, THE CONTRACTING OFFICER HAS STATED THAT AT THE TIME OF AWARD, HE HAD NOTED THAT ENERGY HAD LEFT BLANK THE SPACES PROVIDED FOR THE NUMBER OF FREE LOAN DAYS AND DEMURRAGE CHARGES THEREAFTER, BUT FELT THAT A MISTAKE HAD NOT BEEN MADE BECAUSE (1) PRIOR TO THE FISCAL YEAR 1968 PROCUREMENT OF GASES MANY FIRMS HAD NOT CHARGED DEMURRAGE AND, (2) REPRESENTATIVES FROM TWO OTHER BIDDERS PRESENT AT BID OPENING HAD NOT COMMENTED ON ENERGY'S FAILURE TO PROVIDE FOR DEMURRAGE CHARGES. HOWEVER, UPON REVIEW OF THE EVIDENCE SUBMITTED BY ENERGY IN ITS LETTER OF DECEMBER 15, IN SUPPORT OF ITS CLAIM, THE CONTRACTING OFFICER CONCLUDED THAT THE CLAIMANT HAD, IN FACT, MADE AN ERROR IN ITS BID.

WITH REGARD TO THE CONCLUSION THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF THE MISTAKE IN THE ENERGY BID, WE ARE ADVISED THAT: "IT WAS NOTED AFTER REVIEWING THE ABSTRACT OF BIDS THAT THREE FIRMS ARE RECORDED AS INCLUDING IN THEIR BIDS 30 OR 60 DAY FREE LOAN PERIODS AND DEMURRAGE CHARGES OF ?05 PER DAY BEYOND THE FREE LOAN PERIOD, WHEREAS THE BID OF ENERGY IS VOID OF SUCH NOTATIONS. THE INFORMATION RECORDED FOR WELDING SUPPLY COMPANY, ONE OF THE THREE BIDDERS, IS NOT IN COMPLETE AGREEMENT WITH THE ABSTRACT OF BIDS. THIS FIRM'S BID SHOWS NO FIGURE IN THE SPACE ALONGSIDE THE FREE LOAN PERIOD FOR TYPE E OXYGEN CYLINDERS AND AN -O- IN THE SPACE FOR DEMURRAGE CHARGES BEYOND THE FREE LOAN PERIOD. EVIDENTLY, THE FIRM DID NOT INTEND DEMURRAGE CHARGES FOR TYPE E CYLINDERS.

* * * * * * * "ALTHOUGH THERE ARE SLIGHT DIFFERENCES FOR DETERMINING DEMURRAGE BETWEEN THE FISCAL YEAR 1967 AND 1968 INVITATIONS, THREE BIDS RECEIVED FOR FISCAL YEAR 1967 ARE ENCLOSED. PLEASE NOTE THAT ALL FIRMS INCLUDING ENERGY GASES INC., ENTERED DEMURRAGE CHARGES OF $1.20 PER MONTH, AN AMOUNT EQUIVALENT TO THE DEMURRAGE CHARGE NOW BEING CLAIMED.'

ON THE RECORD BEFORE US, AND SINCE WE AGREE THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR REQUIRING HIM TO REQUEST VERIFICATION OF THE ENERGY BID BEFORE AWARD, THE RELIEF REQUESTED SHOULD BE GRANTED. ACCORDINGLY, THE CONTRACT MAY BE MODIFIED TO PROVIDE FOR THE PAYMENT OF DEMURRAGE CHARGES AT THE RATE OF ?04 PER DAY, PER CYLINDER, AFTER EXPIRATION OF A 30-DAY FREE LOAN PERIOD.

THE FILE ENCLOSED WITH THE LETTER OF FEBRUARY 2, 1968, IS RETURNED HEREWITH AS REQUESTED.