B-165097, SEPT. 5, 1968

B-165097: Sep 5, 1968

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

SECRETARY: REFERENCE IS MADE TO A LETTER OF AUGUST 20. CONTENDS IT MADE IN THE BID UPON WHICH CONTRACT 14-08-0001-11486 IS BASED. WAS THE LOW BIDDER WITH A TOTAL BID OF $17. THE REMAINING TOTAL BIDS WERE $27. THE GOVERNMENT ESTIMATE WAS $22. THE GOVERNMENT ESTIMATE AND UNIT PRICE BIDS RECEIVED ON ITEMS 6 AND 7 WERE AS FOLLOWS: GOVERNMENT INTERMOUNTAIN BIDDER BIDDER ITEM ESTIMATE DRILLING CORP. 2 3 6 $ 4.50 $ 3.10 $ 7.53 $15.00 7 20.00 16.00 45.00 70.00 UPON EXAMINING BIDS. THE GEOLOGICAL SURVEY NOTED THAT THE PRICES QUOTED BY THE LOW BIDDER ON ITEMS 6 AND 7 WERE CONSIDERABLY LOWER THAN THOSE OF THE OTHER BIDDERS AND IT INTENDED TO REQUEST WRITTEN CONFIRMATION OF THOSE ITEMS. HE IMPLIED THAT HE MAY HAVE MADE AN ERROR IN PREPARING THE BID FOR ITEM 6.

B-165097, SEPT. 5, 1968

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF AUGUST 20, 1968, FROM THE DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION, REQUESTING OUR DECISION WITH RESPECT TO AN ERROR THE INTERMOUNTAIN DRILLING CORP. CONTENDS IT MADE IN THE BID UPON WHICH CONTRACT 14-08-0001-11486 IS BASED.

THE INVITATION FOR BIDS ISSUED BY THE GEOLOGICAL SURVEY OF THE DEPARTMENT OF THE INTERIOR SOLICITED PRICES ON SEVEN ITEMS RELATED TO EXPLORATORY CHURN DRILLING NEAR NEVADA CITY, CALIFORNIA. INTERMOUNTAIN DRILLING CORP. WAS THE LOW BIDDER WITH A TOTAL BID OF $17,704. THE REMAINING TOTAL BIDS WERE $27,355 AND $45,660. THE GOVERNMENT ESTIMATE WAS $22,250.

THE GOVERNMENT ESTIMATE AND UNIT PRICE BIDS RECEIVED ON ITEMS 6 AND 7 WERE AS FOLLOWS:

GOVERNMENT INTERMOUNTAIN BIDDER BIDDER ITEM ESTIMATE

DRILLING CORP. 2 3

6 $ 4.50 $ 3.10 $ 7.53 $15.00

7 20.00 16.00 45.00 70.00

UPON EXAMINING BIDS, THE GEOLOGICAL SURVEY NOTED THAT THE PRICES QUOTED BY THE LOW BIDDER ON ITEMS 6 AND 7 WERE CONSIDERABLY LOWER THAN THOSE OF THE OTHER BIDDERS AND IT INTENDED TO REQUEST WRITTEN CONFIRMATION OF THOSE ITEMS. HOWEVER, IN THE MEANTIME, MR. ERIK ANDERSEN, THE PRESIDENT OF INTERMOUNTAIN, CALLED TO ASCERTAIN THE BID RESULTS. UPON BEING PROVIDED THE INFORMATION, HE IMPLIED THAT HE MAY HAVE MADE AN ERROR IN PREPARING THE BID FOR ITEM 6. HE WAS ADVISED TO REVIEW THE BID AND, IF HE FOUND THAT HE HAD MADE AN ERROR, TO NOTIFY THE GEOLOGICAL SURVEY IMMEDIATELY IN WRITING WITH ACCOMPANYING EVIDENCE OF THE ERROR.

SEVEN DAYS LATER, JUNE 17, 1968, A PREAWARD SURVEY WAS MADE OF INTERMOUNTAIN'S FACILITIES. AT THAT TIME, MR. ANDERSEN STATED THAT HE MADE AN ERROR IN ESTIMATING THE PRICE OF STEEL PIPE UNDER ITEM 6 AND THAT HE DID NOT WISH TO WITHDRAW THE BID, BUT DESIRED TO INCREASE THE PRICE FOR ITEM 6 FROM $3.10 TO $4.10 PER FOOT. THE ESTIMATED QUANTITY IN THE INVITATION FOR BIDS FOR ITEM 6 IS 1,500 FEET. MR. ANDERSEN WAS ADVISED AGAIN TO FURNISH A WRITTEN STATEMENT WITH SUPPORTING EVIDENCE TO THE GEOLOGICAL SURVEY.

SINCE JUNE 28, 1968, WAS THE LAST BUSINESS DAY OF THE FISCAL YEAR, AND SINCE NO WRITTEN ADVICE WAS RECEIVED FROM INTERMOUNTAIN BY THE OPENING OF BUSINESS ON JUNE 27, 1968, THE GEOLOGICAL SURVEY ASSUMED THAT INTERMOUNTAIN DID NOT INTEND TO SUBMIT THE ERROR FOR CONSIDERATION AND MADE AN AWARD OF THE CONTRACT TO INTERMOUNTAIN THAT MORNING. THE NEXT DAY, JUNE 28, 1968, THE GEOLOGICAL SURVEY RECEIVED A LETTER FROM MR. ANDERSEN DATED JUNE 26, 1968, THE DAY PRIOR TO AWARD, CONTENDING THAT AN ERROR WAS MADE IN PREPARING ITS BID FOR ITEM 6 AND REQUESTING CORRECTION OF THE PRICE.

BY THE LETTER OF JUNE 26, 1968, AND SUBSEQUENT CORRESPONDENCE, MR. ANDERSEN REQUESTS THAT THE UNIT PRICE FOR ITEM 6 BE INCREASED BY 50 PERCENT TO $4.65 PER FOOT ON THE BASIS THAT THE COST TO HIM FOR THE PIPE IS $3.10 PER FOOT AND THAT THE MARKUP THEREFOR IS USUALLY 50 PERCENT. MR. ANDERSEN ADVISED THAT HE DID NOT USE WORKSHEETS IN PREPARING HIS BID AND THAT HIS ONLY EVIDENCE TO SUPPORT HIS CONTENTION IS A NOTE HIS WIFE PREPARED FOR HIM RELATIVE TO A TELEPHONE CALL FROM HIS PIPE SUPPLIER ADVISING THAT THE COST OF THE PIPE IS $3.10, AND A TELEGRAM FROM THE SUPPLIER DATED JULY 15, 1968, CONFIRMING THE TELEPHONE CONVERSATION. MR. ANDERSEN STATED THAT IN THE PREPARATION OF HIS BID HE REFERRED TO HIS WIFE'S NOTE AND INCLUDED ONLY THE COST OF THE PIPE IN THE BID FOR ITEM 6.

THE LETTER FROM THE DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION POINTS OUT THAT MR. ANDERSEN NOW CLAIMS AN INCREASE OF $1.55 PER FOOT FOR ITEM 6, WHEREAS ON JUNE 17, 1968, HE HAD INDICATED THAT THE INCREASE SHOULD BE $1 PER FOOT. FURTHER, THE LETTER FROM THE DEPUTY ASSISTANT SECRETARY RECOMMENDS AGAINST AN INCREASE IN THE CONTRACT PRICE ON THE BASIS THAT THE ERROR WAS UNILATERAL AND THE CONTRACTOR WAS DILATORY IN PRESENTING ITS CLAIM OF ERROR.

THE RECORD SHOWS THAT THE CONTRACTING OFFICE SUSPECTED ERROR UPON REVIEW OF THE BIDS AND THE BIDDER HAD INDICATED INFORMALLY ON TWO OCCASIONS BEFORE AWARD THAT AN ERROR HAD BEEN MADE IN ITEM 6. WHILE THE CONTRACTING OFFICE HAD NOT RECEIVED A FORMAL CLAIM OF ERROR UNTIL AFTER THE AWARD WAS MADE, THE CONTRACTING OFFICE HAD NOT INSTRUCTED THE BIDDER TO SUBMIT A FORMAL CLAIM BY A PARTICULAR DATE. HENCE, THE CONTRACTING OFFICE SHOULD NOT HAVE ASSUMED, WHEN NO FORMAL CLAIM WAS RECEIVED BY JUNE 27, 1968, THAT INTERMOUNTAIN DID NOT INTEND TO SUBMIT A CLAIM; RATHER, IT SEEMS THAT THE CONTRACTING OFFICE SHOULD HAVE ATTEMPTED TO ASCERTAIN THE BIDDER'S INTENTIONS IN THAT REGARD INSTEAD OF PROCEEDING ON THE BASIS THAT THE CLAIM HAD BEEN ABANDONED BECAUSE NONE HAD BEEN RECEIVED BY THE DATE IT WAS DECIDED TO MAKE THE AWARD. IN THAT CONNECTION, THE INVITATION CONTAINS THE STANDARD 60-DAY PERIOD FOR ACCEPTANCE PROVISION AND THERE IS NOTHING IN THE INVITATION TO INDICATE THAT AWARD HAD TO BE MADE BEFORE THE END OF THE FISCAL YEAR.

IN 37 COMP. GEN. 706, OUR OFFICE HELD THAT WHEN A BIDDER HAS MADE AN ERROR IN BID AND THE CONTRACTING OFFICER HAS REASON TO KNOW OF THE ERROR, BUT TAKES ADVANTAGE OF IT BY MAKING A CONTRACT AWARD, THE CONTRACTOR IS ENTITLED TO CORRECTION OF THE ERROR UPON PRESENTATION OF EVIDENCE ESTABLISHING THE INTENDED BID PRICE. IT WAS INDICATED FURTHER IN THE CITED DECISION THAT, WHEN THE CONTRACTING OFFICER SUSPECTS THE POSSIBILITY OF AN ERROR IN BID AND INVITES A CLAIM OF ERROR AND DOES NOT WAIT FOR RECEIPT OF IT, BUT INSTEAD MAKES AN AWARD BEFORE THE BIDDER RESPONDS, THERE IS NO REASON TO COMPLETELY PENALIZE THE BIDDER BECAUSE IT DID NOT RESPOND BEFORE THE AWARD WAS MADE.

SINCE THE CONTRACTOR DOES NOT HAVE ANY WORKSHEETS ESTABLISHING ITS INTENDED BID PRICE FOR ITEM 6 AND SINCE ITS CLAIM HAS VARIED BETWEEN $4.10 PER FOOT AND $4.65 PER FOOT, ITS INTENDED BID PRICE MAY NOT BE FIXED WITH ANY DEGREE OF CERTAINTY. HOWEVER, ON THE RECORD, OUR OFFICE IS INCLINED TO ACCEPT THE AMOUNT OF $4.10 PER FOOT AS THE MOST REASONABLE ESTIMATE OF THE INTENDED BID FOR ITEM 6.

ACCORDINGLY, THE CONTRACT SHOULD BE REFORMED TO PROVIDE FOR PAYMENT ON THAT BASIS.

ONE SET OF THE ENCLOSURES THAT ACCOMPANIED THE AUGUST 20 LETTER IS RETURNED. THE DUPLICATE SET IS BEING RETAINED IN OUR FILE.