B-166543, JUL. 16, 1969

B-166543: Jul 16, 1969

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INCLUDING WIDE DISPARITY BETWEEN LOW BID AND NEXT LOW BID (?1834 AND ?312) MISTAKE SHOULD HAVE BEEN SUSPECTED AND VERIFICATION REQUESTED. SINCE CONTRACTOR HAS NOT ESTABLISHED CLEARLY WHAT PRICE WOULD HAVE BEEN BUT FOR ERROR. HE SHOULD FURNISH SATISFACTORY EVIDENCE OF DISCREPANCIES BEFORE THE CONTRACT IS REFORMED SO LONG AS PRICE DOES NOT EXCEED THAT OF SECOND LOW BIDDER. NO OBJECTION IS FORESEEN TO REFORMATION AFTER FINAL PAYMENT IN MISTAKE IN BID CASES SUCH AS INSTANT ONE. SECRETARY: REFERENCE IS MADE TO A LETTER OF MARCH 25. FOR WHICH THE CONTRACT WAS AWARDED. WAS ISSUED ON JULY 2. WAS AWARDED THE CONTRACT FOR 96. PLASTOID CORPORATION TELEPHONICALLY ALLEGED A MISTAKE IN ITS BID PRICE ON ITEM NO. 1 IN THAT IT CLAIMED TO HAVE BID ON SIX (6) PAIR RATHER THAN TWELVE (12) PAIR CABLE AS REQUIRED BY THE IFB.

B-166543, JUL. 16, 1969

CONTRACTS - MISTAKES DECISION TO SECRETARY OF TRANSPORTATION CONCERNING REQUEST OF PLASTOID CORPORATION FOR PRICE INCREASE BASED ON MISTAKE IN BID AFTER AWARD OF CONTRACT FOR FURNISHING ELECTRICAL CABLE TO FEDERAL AVIATION ADMINISTRATION. ALTHOUGH CONTRACTING OFFICER RECOMMENDED AGAINST PRICE INCREASE, GIVEN ALL FACTS, INCLUDING WIDE DISPARITY BETWEEN LOW BID AND NEXT LOW BID (?1834 AND ?312) MISTAKE SHOULD HAVE BEEN SUSPECTED AND VERIFICATION REQUESTED. SINCE CONTRACTOR HAS NOT ESTABLISHED CLEARLY WHAT PRICE WOULD HAVE BEEN BUT FOR ERROR, HE SHOULD FURNISH SATISFACTORY EVIDENCE OF DISCREPANCIES BEFORE THE CONTRACT IS REFORMED SO LONG AS PRICE DOES NOT EXCEED THAT OF SECOND LOW BIDDER. WITH RESPECT TO WHETHER CORRECTION COULD BE MADE AFTER FINAL PAYMENT, NO OBJECTION IS FORESEEN TO REFORMATION AFTER FINAL PAYMENT IN MISTAKE IN BID CASES SUCH AS INSTANT ONE.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF MARCH 25, 1969, WITH ENCLOSURES, FROM DONALD S. KING, DIRECTOR, LOGISTICS SERVICE, FEDERAL AVIATION ADMINISTRATION (FAA), SUBMITTING FOR OUR CONSIDERATION A REQUEST FOR AN UPWARD REVISION IN THE PRICE OF CONTRACT NO. DOT FA69AC-7249-4, BASED ON A MISTAKE IN BID ALLEGED AFTER AWARD BY PLASTOID CORPORATION.

INVITATION FOR BIDS (IFB) NO. AC74-8-380, FOR WHICH THE CONTRACT WAS AWARDED, WAS ISSUED ON JULY 2, 1968, BY THE FAA AERONAUTICAL CENTER, OKLAHOMA CITY, OKLAHOMA, AND CALLED FOR BIDS ON TWO TYPES OF EXTERIOR ELECTRICAL CONTROL CABLE. PLASTOID CORPORATION BID ONLY ON ITEM NO. 1 AND ON AUGUST 9, 1968, WAS AWARDED THE CONTRACT FOR 96,000 FEET OF 12 PAIR, NO. 19 AWG, 600 VOLT, TYPE 1A EXTERIOR ELECTRICAL CONTROL CABLES, IN ACCORDANCE WITH FAA SPECIFICATION FAA-E-2042, DATED NOVEMBER 6, 1963, AND AMENDMENT NO. 1 TO THAT SPECIFICATION.

ON AUGUST 16, 1968, PLASTOID CORPORATION TELEPHONICALLY ALLEGED A MISTAKE IN ITS BID PRICE ON ITEM NO. 1 IN THAT IT CLAIMED TO HAVE BID ON SIX (6) PAIR RATHER THAN TWELVE (12) PAIR CABLE AS REQUIRED BY THE IFB. THE CORPORATION SUBMITTED EVIDENCE IN SUPPORT OF THE MISTAKE ON AUGUST 19 AND 22, 1968, OCTOBER 17, 1968, AND JANUARY 23, 1969, AND REQUESTED AN UPWARD REVISION IN THE CONTRACT PRICE FROM ?1834 TO ?303 PER FOOT, OR A RAISE FROM $17,606.40 TO $29,088.00 FOR THE ENTIRE 96,000 FEET.

THERE WERE EIGHT BIDS RECEIVED ON ITEM NO. 1 AND THEY RANGED IN PRICE AS FOLLOWS:

UNIT PRICE 1. PLASTOID CORPORATION

?1834 2. PLASTIC WIRE AND CABLE CORP.

.312 3. ANSONIA WIRE AND CABLE CO. .330 4. PLATT ELECTRIC SUPPLY, INC. .405 5. WHITE PLAINS ELECTRIC SUPPLY CO.

.4115 6. TIME WIRE AND CABLE CO. .500 7. SIMPLEX WIRE AND CABLE CORP..550 8. GENERAL CABLE CORP.

.596

THE CONTRACTING OFFICER RECOMMENDS AGAINST GRANTING THE INCREASE IN PRICE, BECAUSE IN HIS OPINION THE FACTS SHOW NEITHER THAT THE CONTRACTOR MADE A MISTAKE AND BID ON 6 PAIR IN LIEU OF 12 PAIR CABLE NOR THAT HE AS THE CONTRACTING OFFICER, WAS PLACED ON CONSTRUCTIVE NOTICE OF A POSSIBLE MISTAKE IN PLASTOID CORPORATION'S BID.

GENERALLY, A CONTRACT WILL NOT BE REFORMED WHEN A UNILATERAL ERROR IN THE BID PRICE IS ALLEGED AFTER THE CONTRACT HAS BEEN AWARDED BECAUSE ONCE A BID HAS BEEN ACCEPTED, A BINDING CONTRACT IS FORMED AND THE CONTRACTOR MUST BEAR THE CONSEQUENCES OF HIS ERROR. SEE OGDEN AND DOUGHERTY V U.S., 102 CT. CL. 249; SALIGMAN V U.S., 56 F.SUPP. 505; 36 COMP. GEN. 441 (1956); 17 ID. 575 (1938). HOWEVER, IF THE CONTRACTING OFFICER HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR IN THE LOW BID, THE ACCEPTANCE OF THAT BID DOES NOT RESULT IN A BINDING CONTRACT. SEE MOFFETT, HODGKINS, AND CLARKE CO. V ROCHESTER, 178 U.S. 373; EDMUND J. RAPPOLI CO., INC. V U.S., 98 CT. CL. 499. UNDER SUCH CIRCUMSTANCES, A VALID LEGAL BASIS FOR REFORMATION OF THE CONTRACT EXISTS. SEE B-160433, DECEMBER 1, 1966; B-160081, OCTOBER 10, 1966; B 160167, OCTOBER 6, 1966; B -158675, MARCH 30, 1966.

THE CONTRACTING OFFICER HAS STATED THE FOLLOWING REGARDING PLASTOID'S BID:

"THE FACT THAT PLASTOID CORPORATION'S PRICE WAS MUCH LOWER THAN THE OTHER WAS NOTICED AND CONSIDERED BY THE CONTRACTING OFFICER. SINCE WE KNOW THAT THE PRICE OF CABLE VARIES IF THE CABLE IS IN PRODUCTION, THE CONTRACTOR IS LOW ON WORK OR HAS A STOCK OF RAW MATERIAL REQUIRED AND WE HAVE HAD THIS DIFFERENCE IN PRICE BY OTHER VENDORS, THE PRICE WAS NOT QUESTIONED. OTHER CONTRACTS REFLECTING WIDE RANGE BIDDING, IN WHICH NO MISTAKE IN BID WAS INVOLVED, ARE: * * * .'

WE BELIEVE WE SHOULD GIVE BUT CURSORY CONSIDERATION TO THE CONTRACTING OFFICER'S MENTION OF OTHER FAA OFFICES PROCURING EXPERIENCES WITH 6 PAIR AND 12 PAIR CABLE. THE CONTRACTING OFFICER STATED THE FOLLOWING IN THIS REGARD: "THIS OFFICE HAD NO HISTORY REGARDING PURCHASES OF THIS CABLE. SUBSEQUENTLY, WE FOUND THAT OTHER FAA PROCUREMENT OFFICES DID AWARD A CONTRACT ON 12-18-64 TO PLASTIC WIRE AND CABLE FOR 100,000 FT. OF 12 PAIR NO. 19 AT ?58 PER FOOT. TWO CONTRACTS HAVE BEEN WRITTEN FOR 6 PAIR NO. 19 CABLE; FA-4240 IN 1963 FOR 180,000 FT. AT ?10 PER FOOT TO PLASTOID CORP. AND AC-646-2 IN 1964 FOR 52,000 FT. AT ?17 PER FOOT TO PLASTIC WIRE AND CABLE.'

SINCE THE MOST RECENT ILLUSTRATIONS OF PURCHASES OF EITHER 6 PAIR OR 12 PAIR CABLE WERE NEARLY FOUR YEARS PREVIOUSLY, AND TWO OF THE THREE ILLUSTRATIONS GIVEN WERE FOR SUBSTANTIALLY DIFFERENT QUANTITIES OF CABLE, WE FEEL THAT THE THREE ILLUSTRATIONS ARE NOT PERSUASIVE AS CRITERIA FOR ARRIVING AT A REASONABLE PRICE RANGE IN THE INSTANT CASE. SEE 39 COMP. GEN. 405, 407 (1959).

PLASTOID CORPORATION HAS PRESENTED THE FOLLOWING EVIDENCE IN SUPPORT OF ITS ALLEGATION OF ERROR: (1) ITS ESTIMATING DEPARTMENT'S "BID PREPARATION SHEET" DATED JULY 8, 1968, IN WHICH THE CORPORATION'S CODE PP-21368 IS ERRONEOUSLY IDENTIFIED AS 12 PAIR CABLE. (2) THE SALES SERVICE DEPARTMENT'S "BID PROCESS SHEET" DATED JULY 17, 1968, DESCRIBING PP-21368 AS 6 PAIR CABLE, AND ARRIVING AT A UNIT PRICE OF $183.40 PER THOUSAND FEET. (3) THE CORPORATION'S LAST BIDS, SUBMITTED IN JUNE 1964, ON 6 PAIR AND 12 PAIR CABLE, RESPECTIVELY. IN THESE BIDS 6 PAIR CABLE WITH A PRICE OF $175.00 PER THOUSAND FEET FOR 120,000 FEET OF CABLE, WAS IDENTIFIED AS PP-21368, AND 12 PAIR CABLE, WITH A PRICE OF $307.50 PER THOUSAND FEET FOR 200,000 FEET OF CABLE, WAS IDENTIFIED BY THE CORPORATION CODE PP-21369.

WE ARE SATISFIED FROM ALL OF THE ABOVE INFORMATION THAT A MISTAKE WAS MADE IN THIS CASE IN THAT PLASTOID CORPORATION BID ON 6 PAIR CABLE IN LIEU OF 12 PAIR CABLE. WE AGREE WITH THE CONTRACTING OFFICER THAT HIS PRIOR EXPERIENCE AS FAR AS THE PRICE OF THE CABLE VARYING IF THE CABLE IS IN PRODUCTION, OR IF THE CONTRACTOR IS LOW ON WORK OR HAS A STOCK OF REQUIRED RAW MATERIAL, IS CERTAINLY A FACTOR IN DETERMINING IF HE SHOULD HAVE SUSPECTED A MISTAKE AND REQUESTED VERIFICATION PRIOR TO AWARD (SEE 36 COMP. GEN. 27, 30 (1956) ). IT IS OUR OPINION, NONETHELESS, THAT GIVEN ALL THE FACTS IN THIS CASE, INCLUDING THE WIDE DISPARITY BETWEEN THE LOW BID AND THE NEXT LOWEST BID ?1834 AND ?312, RESPECTIVELY), THE CONTRACTING OFFICER SHOULD HAVE SUSPECTED A MISTAKE AND REQUESTED VERIFICATION OF PLASTOID CORPORATION'S BID.

ALTHOUGH WE ARE SATISFIED THAT AN ERROR WAS MADE IN THIS CASE AND THAT THE CONTRACTING OFFICER WAS REQUIRED TO SEEK VERIFICATION OF PLASTOID CORPORATION'S BID PRICE, THE CORPORATION MUST, IN ORDER TO OBTAIN THE DESIRED RELIEF, PRESENT CLEAR AND CONVINCING EVIDENCE ESTABLISHING WHAT THE PRICE WOULD HAVE BEEN BUT FOR THE ERROR, 37 COMP. GEN. 706 (1958), OR OTHERWISE ESTABLISH WHAT THE REASONABLE VALUE OF THE DELIVERED ARTICLES WAS. THE CORPORATION HAS SUBMITTED THE FOLLOWING INFORMATION IN THIS REGARD.

(A) AFTER INITIALLY ALLEGING BY TELEGRAM DATED AUGUST 22, 1968, THAT THE CORRECT UNIT PRICE FOR 12 PAIR CABLE SHOULD HAVE BEEN $303.00 PER THOUSAND FEET, PLASTOID CORPORATION, AT THE REQUEST OF THE PROCURING ACTIVITY ON OCTOBER 17, 1968, SUPPLIED THE FOLLOWING BREAKDOWN OF THAT PRICE:

UNIT COST/M- TOTAL COST 96M- PURCHASED PARTS

$181.37 $17,412.00 DIRECT LABOR 18.96

1,820.00 MFG. BURDEN 235 PERCENT 44.55 4,277.00 ENGINEERING

5.57 535.00 ENGR. BURDEN 70 PERCENT 3.90

374.00 SUB-TOTAL 254.35 24,418.00 PACKAGING AND REELS 13.22 1,269.00 SUB- TOTAL

267.57 25,687.00

UNIT COST/M- TOTAL COST 96M- GENERAL AND ADMIN. EXP-S. 5 PERCENT $13.38 $ 1,284.00 SUB-TOTAL 280.95

26,971.00 PROFIT 3-1/2 PERCENT 9.83 944.00 PREPAID FREIGHT

12.22 1,173.00 CONTRACT PRICE $303.00

$29,088.00

ON JANUARY 23, 1969, A FURTHER BREAKDOWN OF THE PURCHASE PARTS INCREMENT FOR THE 12 PAIR CABLE WAS GIVEN: 96 NO. 19 SOLID BARE COPPER $47.27 49.4 NO.

PRIMARY INSTLATION (POLY) 12.86 136 NO. NO. 36 BARE SHIELDED COPPER 93.17 --- MANUFACTURER'S IDENTIFICATION TAPE .85 2.5 NO. MYLAR TAPE 4.58 80 NO. POLY JACKET 22.64 TOTAL PURCHASE PARTS

$181.37

(B) ON JANUARY 23, 1969, THE CORPORATION SUBMITTED THE FOLLOWING BREAKDOWN AS TO THE ACTUAL BID PRICE:

UNIT COST/M- PURCHASED PARTS

$ 89.93 DIRECT LABOR

11.13 MFG. BURDEN 285 PERCENT 31.72 ENGINEERING

4.34 ENGR. BURDEN 70 PERCENT

3.04 SUB-TOTAL 140.16

UNIT COST/M- PACKAGING AND REELS

$ 8.55 SUB-TOTAL

148.71 GENERAL AND ADMIN. EXP-S. 5 PERCENT 7.44 SUB-TOTAL

156.15 PROFIT AND SET UP CHARGES

16.65 PREPAID FREIGHT 10.60 CONTRACT PRICE 183.40

THE CONTRACTING OFFICER HAS STATED REGARDING THE ABOVE INFORMATION: "PLASTOID CORP. REQUESTED THAT THE UNIT PRICE BE INCREASED TO ?303 PER FOOT. THIS WOULD BE LOWER THAN THE NEXT LOW BID OF .312 PER FOOT SUBMITTED BY PLASTIC WIRE AND CABLE CORP. HOWEVER, A REVIEW OF THE FACTS SUBMITTED REVEAL THAT (1) THE MANUFACTURING BURDEN RATE QUOTED FOR THE 6 PR. IS 285 PERCENT AND THE 12 PR. IS 235 PERCENT, (2) THE PROFIT QUOTED FOR THE 6 PR. IS 9 PERCENT AND THE 12 PR. IS 3.5 PERCENT, (3) FAA ENGINEERS DO NOT AGREE WITH THE CONTRACTOR'S USE OF 136 LBS. OF NO. 36 BARE COPPER SHIELD. THEY STATE IT WOULD REQUIRE ONLY 90 LBS. THEREFORE I AM NOT ASSURED THAT PLASTOID'S PRICE OF ?303 IS IN FACT THE CORRECTED PRICE THEY SHOULD HAVE SUBMITTED. THEY MADE ERRORS ON THEIR CORRECTED PRICE- OR THEY ADJUSTED THESE RATES TO KEEP THIS PRICE UNDER THE NEXT LOW BID. MY CALCULATIONS SHOW THE -CORRECTED PRICE- SHOULD HAVE BEEN APPROXIMATELY ?325. THE TOTAL OF THE CONTRACT WOULD BE INCREASED FROM $17,606.40 TO $29,088.00, A NET INCREASE OF $11,481.60.'

CONSIDERING THE THREE FACTORS MENTIONED BY THE CONTRACTING OFFICER WE MUST CONCLUDE THAT PLASTOID CORPORATION HAS NOT CLEARLY AND CONVINCINGLY ESTABLISHED WHAT ITS PRICE WOULD HAVE BEEN BUT FOR THE ERROR IN CONFUSING THE 6 PAIR WITH THE 12 PAIR CABLE, OR WHAT THE ACTUAL VALUE WAS OF THE ARTICLES DELIVERED. ACCORDINGLY, THE REQUESTED INCREASE IN THE CONTRACT PRICE DUE TO THE MISTAKE IN BID SHOULD BE DENIED UNTIL SUCH DISCREPANCIES ARE SATISFACTORILY EXPLAINED OR CORRECTED BY PLASTOID CORPORATION, AT WHICH TIME THE CONTRACT PRICE MAY BE REFORMED, SO LONG AS IT DOES NOT EXCEED THAT OF THE SECOND LOW BID.

YOU ALSO REQUESTED OUR OPINION, IF WE GRANTED THE REQUESTED RELIEF AS TO WHETHER CORRECTION COULD BE MADE AFTER FINAL PAYMENT. WE FORESEE NO OBJECTION TO REFORMATION AFTER FINAL PAYMENT OF THE CONTRACT IN MISTAKE IN BID CASES SUCH AS THE INSTANT ONE, IN WHICH THE CLAIM HAS BEEN SUBMITTED AND IS BEING CONSIDERED BY THE AGENCY OR CONTRACTING OFFICER AT THE TIME OF FINAL PAYMENT. WE HAVE BEEN INFORMALLY ADVISED BY YOUR DEPARTMENT THAT NO RELEASE OF ANY TYPE WAS RECEIVED FROM THE CONTRACTOR IN THIS CASE AND CLAIMS CANNOT BE REJECTED IN CASES IN WHICH MISTAKE IN BID CLAIMS ARE PENDING BY THE SINGLE CONDUIT OF MAKING FINAL PAYMENT AND NOT INCLUDING THE REQUESTED RELIEF THEREIN.

AS REQUESTED, THE ENCLOSURES FURNISHED WITH THE LETTER OF MARCH 25, 1969, ARE RETURNED.