B-166566, APR. 8, 1969

B-166566: Apr 8, 1969

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THE AWARD WAS MADE TO JERRIE D. ITEM 17 WAS DESCRIBED IN THE INVITATION AS FOLLOWS: "GEAR. THE CONTRACT WAS TERMINATED FOR DEFAULT AND MR. SCHOOLEY WAS ASSESSED LIQUIDATED DAMAGES IN THE AMOUNT OF $336. OF WHICH $236 IS OUTSTANDING. THE GENERAL PRINCIPLES APPLICABLE HERE WERE SET OUT IN SALIGMAN V UNITED STATES. IS SUBSEQUENTLY AWARDED THE CONTRACT. HE WILL BE BOUND BY IT AND MUST BEAR THE CONSEQUENCES . UNLESS THE ERROR IS SO APPARENT THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER IS ON CONSTRUCTIVE NOTICE OF THE ERROR. THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE SURPLUS ITEMS MAY BE PUT.

B-166566, APR. 8, 1969

TO GENERAL HEDLUND:

BY LETTER DATED MARCH 26, 1969, WITH ENCLOSURES (YOUR REFERENCE DSAH-G), THE ASSISTANT COUNSEL REQUESTED OUR DECISION AS TO WHETHER THE DEFENSE LOGISTICS SERVICES CENTER MAY RESCIND THE AWARD OF ITEM 17 UNDER SURPLUS SALES CONTRACT 41-9063-109 BECAUSE OF MISTAKE IN BID ALLEGED AFTER AWARD. THE AWARD WAS MADE TO JERRIE D. SCHOOLEY, 3404 CATALINA ROAD, BOISE, IDAHO, ON DECEMBER 13, 1968, AS A RESULT OF HIS HIGH RESPONSIVE BID TO THE SUBJECT ITEM CONTAINED IN INVITATION FOR BIDS 41-9063-109.

ITEM 17 WAS DESCRIBED IN THE INVITATION AS FOLLOWS:

"GEAR, WINCH: BRADEN CO. P/N MU201R, APPL. TO G741, 3/4 TON, 4 X 4, DODGE TRUCK. FSN 2590-741-2418. OUTSIDE - IN CARTONS AND BOXES - UNUSED - GOOD CONDITION

TOTAL COST $1432

EST. TOTAL WT. 280 LBS. 56 EACH"

ON DECEMBER 24, 1968, MR. SCHOOLEY ADVISED THE CONTRACTING OFFICER IN WRITING THAT HE HAD INTENDED TO BID ON GEAR DRIVEN WINCHES RATHER THAN WINCH GEARS AS ADVERTISED. AT THAT TIME, MR. SCHOOLEY STATED THAT HE WOULD NOT PERFORM UNDER THE CONTRACT. SUBSEQUENTLY, THE CONTRACT WAS TERMINATED FOR DEFAULT AND MR. SCHOOLEY WAS ASSESSED LIQUIDATED DAMAGES IN THE AMOUNT OF $336, OF WHICH $236 IS OUTSTANDING.

THE GENERAL PRINCIPLES APPLICABLE HERE WERE SET OUT IN SALIGMAN V UNITED STATES, 56 F.SUPP. 505, 507, WHERE THE COURT HELD THAT IF A PURCHASER MAKES A UNILATERAL MISTAKE IN BID, AND IS SUBSEQUENTLY AWARDED THE CONTRACT, HE WILL BE BOUND BY IT AND MUST BEAR THE CONSEQUENCES -- UNLESS THE ERROR IS SO APPARENT THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER IS ON CONSTRUCTIVE NOTICE OF THE ERROR. IN THE LATTER SITUATION, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. SEE 5 WILLISTON ON CONTRACTS, SEC. 1598; KEMP V UNITED STATES, 38 F.SUPP. 68; WENDER PRESSES, INC. V UNITED STATES, 343 F.2D 961.

ORDINARILY, A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE SURPLUS ITEMS MAY BE PUT. HOWEVER, IN THIS CASE, MR. SCHOOLEY'S UNIT BID PRICE OF $30 WAS NEARLY DOUBLE THE NEXT HIGH UNIT BID PRICE OF $17.77. FROM THE SECOND HIGH UNIT BID PRICE, BIDS FROM 11 OTHER BIDDERS RANGED DOWNWARDS TO $0.51. MOREOVER, THE COUNSEL, DEFENSE LOGISTICS SERVICES CENTER, REPORTS THAT MR. SCHOOLEY'S TOTAL BID PRICE OF $1,680 WAS GREATER THAN THE ORIGINAL ACQUISITION COST TO THE GOVERNMENT STATED IN THE INVITATION UNDER ITEM 17 AS $1,432, AND THAT "IT IS MOST UNUSUAL TO RECEIVE PRICES ABOVE ACQUISITION COST IN THE SALE OF SURPLUS PROPERTY.' THE REPORT CONCLUDES THAT, AS A GENERAL RULE, WHENEVER THE HIGH BID EXCEEDS THE LISTED ACQUISITION COST THE CONTRACTING OFFICER SHOULD BE ON CONSTRUCTIVE NOTICE OF ERROR AND THE BID SHOULD BE VERIFIED.

ACCORDINGLY, FOR THE ABOVE-STATED REASONS, IT MAY BE CONCLUDED THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND THE BID SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. WE CONCUR IN YOUR RECOMMENDATION THAT THE CONTRACT AWARDED TO MR. SCHOOLEY FOR ITEM 17 OF THE INVITATION SHOULD BE RESCINDED WITHOUT LIABILITY TO HIM.