B-164536, JUL. 19, 1968

B-164536, JUL. 19, 1968

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER SPTS-L DATED JUNE 7, 1968, WITH ENCLOSURES, FROM THE COUNSEL, OFFICE OF THE CHIEF OF SUPPORT SERVICES, SUBMITTING FOR OUR CONSIDERATION THE REQUEST OF THE CALIFORNIA TRUCK PARTS AND EQUIPMENT COMPANY (CALIFORNIA) FOR RESCISSION OF ITEM 7 AWARDED TO IT UNDER SALES CONTRACT NO. 92-557-8044-008 BECAUSE OF A MISTAKE IN BID ALLEGED AFTER AWARD OF THE CONTRACT.

THE UNITED STATES ARMY DEPOT COMMAND, JAPAN, PROPERTY DISPOSAL DIVISION, SOLICITED BIDS UNDER SALES INVITATION NO. 92-557-8044 -- OPENING DATE MARCH 12, 1968 -- COVERING 65 ITEMS OF SURPLUS PROPERTY AS LISTED AND DESCRIBED THEREIN. ITEM 7 (THE ITEM UPON WHICH CALIFORNIA HAS ALLEGED THAT IT DID NOT INTEND TO BID) WAS DESCRIBED AS FOLLOWS: "SUSPENSIONS:

13 EACH USED: APPEAR IN FAIR CONDITION, REPAIRS REQUIRED. ESTIMATED WEIGHT: 18.7 SHORT TONS. ESTIMATED ACQUISITION COST: $26,715.00 (2510-706 -7329) HORIZONTAL, LEFT FRONT AND RIGHT REAR, ASSEMBLY.'

IN RESPONSE TO THE SALES INVITATION, CALIFORNIA SUBMITTED BIDS ON SEVERAL ITEMS, AMONG WHICH WAS AN INDICATED BID FOR ITEM 7. ITEM 7 WAS THE FIRST OF THE SERIES RUNNING FROM ITEMS 7 THROUGH 12 UPON WHICH CALIFORNIA SUBMITTED BIDS. CALIFORNIA'S BID ON ITEM 7 WAS INDICATED AS A UNIT PRICE BID OF $102.99 AND EXTENDED FOR THE 13 ITEMS INVOLVED TO A TOTAL PRICE BID OF $1,338.87. ALSO, THIS EXTENDED PRICE OF $1,338.87 WAS ADDED TO THE EXTENDED PRICES FOR ITEMS 8 THROUGH 12 FOR A TOTAL BID OF $9,006.99 APPEARING ON PAGE NO. 63 OF STANDARD FORM 114 B OF THE INVITATION AND SUBMITTED BY CALIFORNIA TO THE SALES OFFICE. CALIFORNIA'S BID FOR ITEM 7 WAS PUBLICLY READ AS $102.99 PER UNIT WHICH WAS THE HIGHEST RECEIVED FOR ITEM 7. THE OTHER TWO BIDS RECEIVED (FROM JAPANESE FIRMS) ON ITEM 7 WERE IN THE AMOUNTS OF 6,850 YEN ($19.03) AND 4,300 YEN ($11.94). BEFORE AWARD OF CONTRACT WAS MADE A TELEGRAPHIC MODIFICATION OF CALIFORNIA'S BID REDUCING ITS PRICE BID FOR ITEM 8 AND CANCELING ITS BIDS FOR ITEMS 9 AND 10 WAS RECEIVED PRIOR TO THE DATE AND TIME SET FOR BID OPENING. AWARD OF THE CONTRACT, WHICH INCLUDED ITEMS 7, 11 AND 12, WAS THEREUPON MADE TO CALIFORNIA ON MARCH 21, 1968.

THEREAFTER, CALIFORNIA BY LETTER OF MARCH 28, 1968, NOTIFIED THE SALES CONTRACTING OFFICER THAT AN ERROR HAD BEEN MADE IN AWARDING ITEM 7 TO THE FIRM SINCE CALIFORNIA HAD NOT INTENDED TO SUBMIT A BID FOR SUCH ITEM. THIS END, CALIFORNIA SUBMITTED ITS WORKSHEETS AND CONTENDED THAT ITS ENTRY OF $102.99 IN THE SPACE PROVIDED FOR ITEM 7 ACTUALLY WAS A NOTATION OF A CORRECTION MEANT TO APPLY TO ITEM 8 AND SINCE ITEM 7 INVOLVED TANK PARTS, WHICH CALIFORNIA DOES NOT BUY, THE MISTAKE SHOULD HAVE BEEN APPARENT. THIS CONNECTION, THE CONTRACTING OFFICER REPORTS THAT THERE WAS NO INDICATION OF A MISTAKE IN THE BID SUBMITTED BY CALIFORNIA, AND THAT THE BID PRICE WAS NOT OUT OF LINE WITH THE BIDS NORMALLY RECEIVED FROM LOCAL BIDDERS.

WHILE IT HAS BEEN ADMINISTRATIVELY RECOMMENDED BY THE CONTRACTING OFFICER THAT ITEM 7 BE RESCINDED FROM CALIFORNIA'S SALES CONTRACT INASMUCH AS THE EVIDENCE IS "REASONABLY" CLEAR AND CONVINCING THAT THE PURCHASER DID NOT INTEND TO BID ON ITEM 7, WE HAVE FOUND NOTHING IN THE RECORD BEFORE US THAT WOULD HAVE, OR SHOULD HAVE, ALERTED THE CONTRACTING OFFICER TO A MISTAKE IN CALIFORNIA'S BID. IN FACT, WE NOTE THAT CALIFORNIA'S BID ON ITEM 7 WAS ONLY 5 PERCENT OF THE ESTIMATED ACQUISITION COST OF THE MATERIAL INVOLVED.

THE BASIC QUESTION FOR CONSIDERATION HERE IS NOT WHETHER CALIFORNIA MADE A MISTAKE IN ITS BID INSOFAR AS ITEM 7 WAS CONCERNED BUT WHETHER THE ACCEPTANCE OF THE BID BY THE CONTRACTING OFFICER CONSUMATED A VALID AND BINDING CONTRACT. ANY ERROR WHICH MAY HAVE BEEN MADE WAS DUE SOLELY TO THE NEGLIGENCE OF THE BIDDER SINCE THE INVITATION WAS CLEAR AS TO THE MATERIALS COVERED BY THE VARIOUS ITEMS.

THE GENERAL PRINCIPLES APPLICABLE TO THIS CASE WERE SET OUT IN SALIGMAN V UNITED STATES, 56 F.SUPP. 505, 507, WHERE IT WAS HELD THAT IF THERE WAS A UNILATERAL MISTAKE IN BID BY THE PURCHASER AND HE WAS AWARDED THE CONTRACT HE WOULD BE BOUND BY IT AND MUST BEAR THE CONSEQUENCES -- UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE MISTAKE. IN THAT CASE THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. KEMP V UNITED STATES, 38 F.SUPP. 568; WENDER PRESSES, INC. V UNITED STATES, 343 F.2D 961. SEE, ALSO, B-157859, NOVEMBER 15, 1965, AND B-159013, MAY 12, 1966.

AS THIS WAS A SALE OF SURPLUS MATERIAL, KNOWLEDGE OF THE BID MISTAKE CANNOT BE IMPUTED TO THE CONTRACTING OFFICER BY COMPARING THE DIFFERENT BIDS AND NOTING THEIR RELATION TO EACH OTHER BECAUSE DIFFERENCES IN THE PRICES BID FOR SURPLUS PROPERTY DO NOT HAVE THE SAME IMPLICATION AS WOULD LIKE DIFFERENCES IN PRICES QUOTED ON NEW EQUIPMENT, SUPPLIES, ETC., TO BE FURNISHED. SEE UNITED STATES V SABIN METAL CORPORATION, 151 F.SUPP. 683, AFFIRMED 253 F.2D 956; 16 COMP. GEN. 96; 17 ID. 388; ID. 601, 603. AND THE CONTRACTING OFFICER HAD NO ACTUAL KNOWLEDGE OF THE MISTAKE PRIOR TO AWARD.

IN THE INSTANT CASE THE ALLEGED ERROR ON ITEM 7 WAS NOT APPARENT ON THE FACE OF CALIFORNIA'S BID, AND THE DIFFERENCE IN THE PRICE BID DOES NOT CONSTITUTE A BASIS TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR. THE ACCEPTANCE OF THE BID WAS IN GOOD FAITH -- NO ERROR HAVING BEEN ALLEGED UNTIL AFTER AWARD OF THE CONTRACT. SUCH AWARD CONSUMMATED A VALID AND BINDING CONTRACT AND FIXED THE RIGHTS AND OBLIGATIONS OF THE PARTIES. UNITED STATES V PURCELL ENVELOPE COMPANY, 249 U.S. 313; AMERICAN SMELTING AND REFINING COMPANY V UNITED STATES, 259 U.S. 75.

ACCORDINGLY, IT IS CONCLUDED THAT THERE IS NO LEGAL BASIS FOR RESCINDING ITEM 7 FROM THE CONTRACT AWARDED TO CALIFORNIA.