B-165175, OCT. 28, 1968

B-165175: Oct 28, 1968

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SECRETARY: REFERENCE IS MADE TO A LETTER OF OCTOBER 9. SIX OFFERS WERE RECEIVED AND THE FOUR LOWEST WERE AS FOLLOWS: BIDDER UNIT PRICE BROMION INCORPORATED $29 TELE-CRAFT ELECTRONICS COMPANY 39 ELECTROMAGNETIC INDUSTRY. INC. 42 VOLTRON PRODUCTS INCORPORATED 43 THE CONTRACTING OFFICER HAS REPORTED THAT THE LOWEST PREVIOUS PRICE PAID FOR THE FREQUENCY CONVERTERS WAS $41 EACH AND THAT HE CONCLUDED THAT BROMION'S UNIT PRICE OF $29 WAS FAIR AND REASONABLE. IS LOWER THAN ANY PREVIOUS PROCUREMENT. THE COMPETITION RECEIVED ON THIS RFP INDICATED THAT THE PRICE SUBMITTED IS THE BEST POSSIBLE PRICE OBTAINABLE AND IS LOWER THAN EXISTING MARKET CONDITIONS.'. REQUESTED IMMEDIATE CANCELLATION OF THE CONTRACT ALLEGING THAT "BOTH SOLICITATION AND AGREEMENT WERE EXECUTED BY PERSON NOT AUTHORIZED TO SIGN FOR AND COMMIT THE COMPANY.'.

B-165175, OCT. 28, 1968

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF OCTOBER 9, 1968, WITH ENCLOSURES, FROM THE ACTING GENERAL COUNSEL, HEADQUARTERS UNITED STATES ARMY MATERIEL COMMAND, FURNISHING THE REPORT REQUESTED BY OUR OFFICE RELATIVE TO THE REQUEST OF BROMION INCORPORATED, SLOATSBURG, NEW YORK, FOR RESCISSION OR REFORMATION OF NEGOTIATED CONTRACT NO. DAAK01-68-C 6868.

BY SOLICITATION NO. DAAK01-68-R-3882, THE UNITED STATES ARMY MOBILITY EQUIPMENT COMMAND REQUESTED PROPOSALS FOR FURNISHING 351 D.C. FREQUENCY CONVERTERS. SIX OFFERS WERE RECEIVED AND THE FOUR LOWEST WERE AS FOLLOWS:

BIDDER UNIT PRICE

BROMION INCORPORATED $29

TELE-CRAFT ELECTRONICS COMPANY 39

ELECTROMAGNETIC INDUSTRY, INC. 42

VOLTRON PRODUCTS INCORPORATED 43

THE CONTRACTING OFFICER HAS REPORTED THAT THE LOWEST PREVIOUS PRICE PAID FOR THE FREQUENCY CONVERTERS WAS $41 EACH AND THAT HE CONCLUDED THAT BROMION'S UNIT PRICE OF $29 WAS FAIR AND REASONABLE. ON MAY 22, 1968, THE CONTRACTING OFFICER, WITHOUT PRICE VERIFICATION, AWARDED A CONTRACT IN THE AMOUNT OF $10,179 TO BROMION ON ITS INITIAL OFFER WITHOUT FURTHER DISCUSSION AS PERMITTED BY PARAGRAPH 10 (G) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS. IN THE SUMMARY OF NEGOTIATIONS, THE CONTRACTING OFFICER STATED THAT "PREVIOUS PROCUREMENT HISTORY INDICATES THAT THE PRICE SUBMITTED BY BROMION, INC. IS LOWER THAN ANY PREVIOUS PROCUREMENT. THE COMPETITION RECEIVED ON THIS RFP INDICATED THAT THE PRICE SUBMITTED IS THE BEST POSSIBLE PRICE OBTAINABLE AND IS LOWER THAN EXISTING MARKET CONDITIONS.'

BY TELEGRAM DATED JUNE 3, 1968, GUY OBOLENSKY, PRESIDENT OF BROMION INCORPORATED, REQUESTED IMMEDIATE CANCELLATION OF THE CONTRACT ALLEGING THAT "BOTH SOLICITATION AND AGREEMENT WERE EXECUTED BY PERSON NOT AUTHORIZED TO SIGN FOR AND COMMIT THE COMPANY.' IN A LETTER DATED JUNE 6, 1968, BROMION MADE THE FOLLOWING STATEMENTS:

(1) THE SIGNATURES ON ITS PROPOSAL AND LETTER OF MAY 3, 1968, BY WHICH IT EXTENDED THE PERIOD FOR ACCEPTANCE OF ITS PROPOSAL WERE NOT THOSE OF MR. OBOLENSKY;

(2) THE INDIVIDUALS, MRS. MURTAUGH AND MR. THOMPSON, WHO WERE ASSUMED TO HAVE SIGNED THESE DOCUMENTS, HAD NO PERMISSION TO DO SO, WERE NOT OFFICERS OF BROMION INCORPORATED AND WERE NO LONGER EMPLOYED BY BROMION;

(3) THE ONLY OFFICERS OF BROMION WERE MR. OBOLENSKY AND HIS WIFE AND ONLY MR. OBOLENSKY IS AUTHORIZED TO COMMIT HIS FIRM; AND

(4) UNLESS A REASONABLE CONTRACT PRICE COULD BE RENEGOTIATED, BROMION WOULD LIKE TO WITHDRAW FROM THE CONTRACT. IN REGARD TO STATEMENT NO. (4), THE CORPORATION STATED THAT IT WOULD SUSTAIN A LOSS IF IT HAD TO FURNISH THE FREQUENCY CONVERTERS AT ITS INCORRECT PRICE OF $29 EACH. THE RECORD INDICATES THAT IN A TELEPHONE CONVERSATION WITH THE CONTRACTING OFFICER ON JUNE 5, 1968, AN OFFICIAL OF BROMION INDICATED THAT THE CORRECT PRICE FOR THE FREQUENCY CONVERTERS WOULD BE APPROXIMATELY $50 TO $60 PER CONVERTER.

IT IS ADMINISTRATIVELY REPORTED THAT THE PROPOSAL SUBMITTED ON BEHALF OF BROMION AND ACCEPTED BY THE CONTRACTING OFFICER WAS TENDERED BY AN UNAUTHORIZED EMPLOYEE OF THE CORPORATION. WHILE THE ADMINISTRATIVE LEGAL OPINION MAKES OUT A PERSUASIVE CASE FOR DISREGARDING THE PROPOSAL BECAUSE IT WAS SIGNED BY AN EMPLOYEE NOT AUTHORIZED TO DO SO, MUCH OF THE EVIDENCE IS SELF-SERVING AND INCONCLUSIVE AS TO THE LEGAL EFFECT, IF ANY, OF BROMION'S OFFER. HOWEVER, ON THE BASIS OF THE RECORD BEFORE US, WE BELIEVE THAT NO VALID CONTRACT WAS CONSUMMATED BY THE GOVERNMENT'S ACCEPTANCE SINCE THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF AN ERROR IN THE BROMION PROPOSAL PRIOR TO AWARD.

WHERE A MISTAKE HAS BEEN ALLEGED AFTER AWARD OF THE CONTRACT, OUR OFFICE WILL GRANT RELIEF IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. THIS IS A WELL-ESTABLISHED PRINCIPLE OF THE LAW OF CONTRACTS, AND IS EQUALLY APPLICABLE TO PRIVATE AND PUBLIC CONTRACTS, WHETHER MADE BY NEGOTIATION OR BY FORMAL ADVERTISING (B-141294, DECEMBER 8, 1959; B-156542, JUNE 1, 1965; 30 COMP. GEN. 509). AN EXAMINATION OF THE OFFERS RECEIVED SHOWS THAT THE BROMION OFFER WAS MORE THAN 34 PERCENT LESS THAN THE SECOND OFFER AND WAS MORE THAN 41 PERCENT IN EXCESS OF THE PRIOR PRICE PAID FOR THE ITEM. VIEW THEREOF, THE CONTRACTING OFFICER SHOULD HAVE REQUESTED VERIFICATION OF THE OFFERED PRICE BEFORE AWARD. WE THINK THAT SUCH ACTION WAS CLEARLY REQUIRED AS EVIDENCED BY THE SUMMARY OF NEGOTIATIONS, QUOTED ABOVE.

ACCORDINGLY, THE PURPORTED CONTRACT SHOULD BE CANCELED, AS ADMINISTRATIVELY RECOMMENDED, WITHOUT LIABILITY TO BROMION INCORPORATED.