B-167031, JUN. 16, 1969

B-167031, JUN. 16, 1969

TO MR. KUNZIG:

REFERENCE IS MADE TO A LETTER DATED MAY 21, 1969, WITH ENCLOSURES, FROM YOUR GENERAL COUNSEL, REQUESTING A DECISION AS TO WHETHER THE GAL BOX MANUFACTURING CO. MAY BE RELIEVED OF ALL OBLIGATIONS ARISING UNDER NEGOTIATED CONTRACT NO. GS-07S-12417 AWARDED TO THAT FIRM UNDER SOLICITATION NO. F/21310-TE, ISSUED BY THE FEDERAL SUPPLY SERVICE, BUYING DIVISION, REGION 7, FORT WORTH, TEXAS.

IT IS REPORTED THAT ON MARCH 5, 1968, OFFERS COVERING A DEFINITE QUANTITY PROCUREMENT OF 10 ITEMS OF FSC 8115 PLYWOOD BOXES WERE SOLICITED BY TELEPHONE FROM SEVEN MANUFACTURERS; THAT FIVE OF THE SEVEN MANUFACTURERS SUBMITTED ORAL QUOTATIONS; THAT THE FIVE MANUFACTURERS WERE AGAIN CONTACTED BY TELEPHONE ON MARCH 8, 1968, FOR THE PURPOSE OF CHECKING WHETHER THE OFFERORS HAD SUBMITTED THEIR LOWEST PROPOSALS; AND THAT WHEN CONTACTED THE SECOND TIME, THE GAL-BOX MANUFACTURING CO. REDUCED ITS ORIGINAL OFFERED UNIT PRICES ON FIVE ITEMS BY AMOUNTS RANGING FROM $0.75 TO $1.50 PER UNIT.

BY TELEGRAM DATED MARCH 11, 1968, GAL-BOX WAS ADVISED TO PROCEED WITH THE ORDER FOR ITEMS 1 THROUGH 8, AND 10. THE COMPANY WAS ALSO INFORMED THAT 25 PERCENT OF THE TOTAL QUANTITY OF BOXES HAD TO BE DELIVERED BY MARCH 15, 1968, AND THAT THE REMAINDER HAD TO BE DELIVERED BY APRIL 1, 1968. TELEGRAM DATED MARCH 12, 1968, GAL-BOX ADVISED THAT IT COULD NOT POSSIBLY COMPLY WITH THE STATED DELIVERY REQUIREMENTS, BUT THAT IT COULD DELIVER 25 PERCENT OF THE BOXES BY APRIL 1, 1968, AND THE REMAINDER BY MAY 30, 1968. THE COMPANY'S PROPOSED DELIVERY SCHEDULE WAS CONSIDERED AND ACCEPTED BY THE PROCURING ACTIVITY. ON APRIL 22 AND MAY 31, 1968, TWO AMENDMENTS TO THE CONTRACT WERE ISSUED AND THE EFFECT OF SUCH AMENDMENTS WAS TO CHANGE THE DIMENSIONS OF ITEM NO. 4 AND TO CANCEL ITEM NO. 10 IN ITS ENTIRETY BY MUTUAL AGREEMENT.

IT IS REPORTED THAT ON MAY 3, 1968, AFTER COMPLETION OF SOME PARTIAL SHIPMENTS OF THE BOXES, MR. ROBERT R. LINDSEY, VICE PRESIDENT OF GAL-BOX TELEPHONED ALLEGING THAT THE COMPANY HAD MADE AN ERROR IN COMPUTING ITS BID PRICES FOR THE BOXES IN THAT IT HAD FAILED TO INCLUDE AN AMOUNT TO COVER THE OVERHEAD COSTS. MR. LINDSEY REQUESTED THAT THE COMPANY BE RELIEVED OF PERFORMING THE CONTRACT BECAUSE IT WOULD FACE BANKRUPTCY IF IT HAD TO FURNISH THE BOXES AT ITS ORIGINAL BID PRICES.

IN A CONFIRMING LETTER DATED MAY 15, 1969, THE PRESIDENT OF THE COMPANY REQUESTED THAT THE CONTRACT UNIT PRICES OF ITEMS 1 THROUGH 8 BE INCREASED IN THE FOLLOWING MANNER:

ORIGINAL REVISED ITEMS PRICE PRICE 1

$15.50 $17.05 2

24.00 26.40 3 24.50

26.95 4 24.00

26.40 5 25.00 27.50 6

24.50 26.90 7

25.50 28.05 8 25.50

29.70

IN SUPPORT OF ITS ALLEGATION OF ERROR, THE COMPANY SUBMITTED ITS ESTIMATE SHEETS WHICH SUBSTANTIATE THAT THE COMPANY IN COMPUTING ITS BID PRICES FAILED TO INCLUDE AN AMOUNT TO COVER THE ITEM OF OVERHEAD COSTS. THE COMPANY ALSO SUBMITTED A COPY OF A LETTER DATED JUNE 19, 1968, FROM MR. HAROLD R. FULLER, CERTIFIED PUBLIC ACCOUNTANT, IN WHICH MR. FULLER STATED THAT THE RECORDS OF GAL-BOX INDICATE THAT THE PERCENTAGE OF OVERHEAD TO SALES IS 20.94 PERCENT AND THAT BECAUSE OF THE FAILURE OF THE COMPANY TO INCLUDE AN AMOUNT IN ITS BID PRICE TO COVER THE ITEM OF OVERHEAD COSTS IT HAD UNDERSTATED ITS AGGREGATE TOTAL BID PRICE FOR THE ITEMS INVOLVED BY $19,168.22. BY LETTER DATED JUNE 27, 1968, THE CONTRACTING OFFICER ADVISED THE COMPANY THAT ITS RIGHT TO PROCEED WITH THE CONTRACT WAS TERMINATED AND THAT THE SUPPLIES ON WHICH IT HAD DEFAULTED WOULD BE PROCURED BY THE GOVERNMENT FROM OTHER SOURCES AND THAT IT WOULD BE HELD RESPONSIBLE FOR ANY EXCESS COSTS OCCASIONED THE GOVERNMENT AS A RESULT OF SUCH PROCUREMENT. SUBSEQUENTLY, REPLACEMENT CONTRACTS FOR THE SAME TYPE OF BOXES WERE ENTERED INTO WITH THE AMERICAN MOVING AND STORAGE COMPANY AND THE THOMPSON CONTAINER CO. AT AN EXCESS COST OF $16,857.25 TO THE GOVERNMENT.

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).

THE ABSTRACT OF QUOTATIONS SHOWS THAT FOR THE BOXES DESCRIBED UNDER ITEMS 1 THROUGH 8, GAL-BOX AND THE NEXT LOWEST OFFEROR QUOTED THE FOLLOWING PRICES:

NEXT LOWEST

ITEMS GAL-BOX OFFEROR 1

$15.50 $16.29 2

24.00 27.38 3 24.50

33.75 4 24.00

28.67 5 25.00 32.67

6 24.50 34.26 7

25.50 33.52 8

25.50 32.57

IN HIS FINDINGS AND DETERMINATION, IN WHICH HE RECOMMENDED THAT GAL BOX BE RELIEVED OF ALL OBLIGATIONS ARISING UNDER THE CONTRACT, THE CONTRACTING OFFICER STATES THAT THE DISPARITY BETWEEN THE PRICES QUOTED BY GAL-BOX AND THE PRICES QUOTED BY THE OTHER OFFERORS WAS SO APPARENT AS TO HAVE CHARGED HIM WITH NOTICE OF THE PROBABILITY OF AN ERROR IN THE COMPANY'S ORAL QUOTATION. WE ALSO ARE OF THE OPINION THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN AWARE OF THE PROBABILITY OF ERROR IN THE COMPANY'S QUOTATION AND, CONSEQUENTLY, THE QUOTATION SHOULD NOT HAVE BEEN ACCEPTED WITHOUT VERIFICATION THEREOF.

SINCE THE OFFER OF GAL-BOX SHOULD HAVE BEEN VERIFIED BEFORE ITS ACCEPTANCE, WE ARE OF THE OPINION THAT THE ACCEPTANCE OF THE OFFER OF GAL- BOX DID NOT RESULT IN A VALID AND BINDING CONTRACT. ACCORDINGLY, NO LEGAL BASIS EXISTS FOR HOLDING GAL-BOX LIABLE FOR ANY EXCESS COSTS RESULTING FROM THE AWARD OF CONTRACTS TO THE REPLACEMENT CONTRACTORS.

IN HIS LETTER YOUR GENERAL COUNSEL STATES THAT IN VIEW OF THE FACT THAT SOME OF THE BOXES COVERED BY THE CONTRACT HAVE BEEN DELIVERED AND PAID FOR, THE PROCURING ACTIVITY INTENDS TO ENTER INTO NEGOTIATIONS WITH GAL- BOX FOR ADJUSTMENT OF THE PAYMENT FOR THE BOXES DELIVERED ON A QUANTUM MERUIT BASIS, NOT TO EXCEED THE PRICES QUOTED BY THE SECOND LOW OFFEROR. WE HAVE NO OBJECTION TO THIS PROPOSED ACTION. A REFERENCE TO THIS DECISION SHOULD BE MADE ON THE VOUCHER COVERING THE ADDITIONAL PAYMENT TO THE GAL-BOX MANUFACTURING CO. ..END :