B-167674, SEP 12, 1969

B-167674: Sep 12, 1969

Additional Materials:

Contact:

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

 

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

PURCHASER WHO BID $31 FOR ITEM WHEN .31 CENTS WAS INTENDED MAY HAVE ITEM CANCELED SINCE REVIEW OF OTHER BIDS FOR ITEM SHOWS RANGE OF $5.16 TO .11 CENTS SO THAT CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR AND HAD PRICE VERIFIED. TO GENERAL HEDLUND: REFERENCE IS MADE TO A LETTER DATED AUGUST 7. TO HAVE BEEN MADE IN ITS BID ON WHICH SALES CONTRACT NO. 37-0003-096 IS BASED. PROSPECTIVE BIDDERS WERE ADVISED THAT THE ACQUISITION COST OF THE GENERATOR REPAIR KITS WAS $1. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEM 128 AND ANOTHER ITEM ON JULY 15. IT IS REPORTED THAT ON JULY 17. THE BID OF BMS WAS COMPLETELY AUDITED. NO DISCREPANCIES WERE FOUND. ITEM 128 WAS AWARDED TO BMS.

B-167674, SEP 12, 1969

BIDS - MISTAKES DECISION TO DEFENSE SUPPLY AGENCY AUTHORIZING CANCELLATION OF ITEM FROM SURPLUS SALES CONTRACT WITH BEARINGS & MOTIVE SPECIALTIES CO., INC., ON BASIS OF ERROR. PURCHASER WHO BID $31 FOR ITEM WHEN .31 CENTS WAS INTENDED MAY HAVE ITEM CANCELED SINCE REVIEW OF OTHER BIDS FOR ITEM SHOWS RANGE OF $5.16 TO .11 CENTS SO THAT CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR AND HAD PRICE VERIFIED.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO A LETTER DATED AUGUST 7, 1969, FILE REFERENCE DSAH- G, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, HEADQUARTERS, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY BEARINGS & MOTIVE SPECIALTIES CO., INC., HEREINAFTER REFERRED TO AS BMS, TO HAVE BEEN MADE IN ITS BID ON WHICH SALES CONTRACT NO. 37-0003-096 IS BASED.

THE DEFENSE SURPLUS SALES OFFICE, FORT WORTH, TEXAS, BY INVITATION NO. 37 -0003 REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS, INCLUDING ITEM 128 DESCRIBED AS 57 GENERATOR REPAIR KITS. PROSPECTIVE BIDDERS WERE ADVISED THAT THE ACQUISITION COST OF THE GENERATOR REPAIR KITS WAS $1,596. IN RESPONSE BMS SUBMITTED A BID DATED JULY 7, 1969, OFFERING TO PURCHASE, AMONG OTHER ITEMS, THE GENERATOR REPAIR KITS OFFERED FOR SALE UNDER ITEM 128 AT A UNIT PRICE OF $31 OR FOR A TOTAL PRICE OF $1,767. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEM 128 AND ANOTHER ITEM ON JULY 15, 1969.

IT IS REPORTED THAT ON JULY 17, 1969, THE SECRETARY OF THE CORPORATION TELEPHONED THE CONTRACTING OFFICER AND ALLEGED THAT AN ERROR HAD BEEN MADE IN THE CORPORATION'S BID ON ITEM 128. IN A LETTER DATED JULY 18, 1969, THE CORPORATION'S SECRETARY STATED THAT IN USING THE WORKSHEET PREPARED BY ONE OF THE OFFICIALS OF THE CORPORATION, ITS CLERK MISREAD "31 -" AS $31 AND INSERTED THAT AMOUNT IN THE CORPORATION'S BID AS THE UNIT PRICE FOR ITEM 128. THE CORPORATION'S SECRETARY ALSO STATED THAT THE CORPORATION INTENDED TO BID $0.31 FOR EACH OF THE TWO BEARINGS IN THE KIT COVERED BY ITEM 128 AND THAT THE CLERK WHEN TYPING THE BID FROM THE BID WORKPAPERS HAD INADVERTENTLY ENTERED A $31 UNIT PRICE RATHER THAN $0.62 REPRESENTING $0.31 FOR EACH OF THE TWO BEARINGS IN THE KIT. THE CORPORATION'S SECRETARY REQUESTED THAT ITEM 128 OF THE CONTRACT BE CANCELED WITHOUT LIABILITY TO THE CORPORATION.

IN SUPPORT OF ITS ALLEGATION OF ERROR, THE CORPORATION SUBMITTED ITS WORKSHEET WHICH SHOWS OPPOSITE ITEM 128 THE FOLLOWING ENTRY: "2 EA 205PP 31 -."

THE 10 OTHER BIDS ON ITEM 128 RANGED FROM $5.16 EACH TO $0.11 EACH. HIS REPORT THE CONTRACTING OFFICER STATES THAT HE NOTED THE WIDE VARIANCE BETWEEN THE BID OF BMS AND THE NEXT HIGH BID ON ITEM 128 AND THAT IN VIEW OF THIS VARIANCE, THE BID OF BMS WAS COMPLETELY AUDITED, AND NO DISCREPANCIES WERE FOUND. THE CONTRACTING OFFICER ALSO STATED THAT THE CURRENT MARKET APPRAISAL FURNISHED BY THE SALES MERCHANDISING DIVISION REVEALED THAT AN ESTIMATED MARKET VALUE OF $1 EACH HAD BEEN ESTABLISHED FOR THE KITS COVERED BY ITEM 128 AND THAT BASED ON THESE FINDINGS, ITEM 128 WAS AWARDED TO BMS.

NORMALLY, A WIDE RANGE OF BID PRICES IN RESPONSE TO A SURPLUS SALE IS NOT SUFFICIENT TO PLACE A CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR BECAUSE THE PRICES OFFERED DEPEND TO A GREAT EXTENT UPON THE USES TO WHICH THE PROPERTY WILL BE PUT, OR UPON THE RISK OF RESALE WHICH THE BIDDER MAY BE WILLING TO TAKE. SEE B-151079, MARCH 28, 1963. ALSO, SEE UNITED STATES V. SABIN METAL CORPORATION, 151 F. SUPP. 683; AFFIRMED 253 F. 2D 956, AND CASES CITED THEREIN. HOWEVER, IN THIS CASE, THE BID PRICE OF BMS ON ITEM 128 WAS SIX TIMES THE AMOUNT OF THE NEXT HIGHEST BID PRICE ON THAT ITEM AND 31 TIMES THE ESTIMATED MARKET VALUE ESTABLISHED BY THE GOVERNMENT. MOREOVER, THE CORPORATION'S BID PRICE WAS GREATER THAN THE ORIGINAL ACQUISITION COST TO THE GOVERNMENT STATED IN THE INVITATION UNDER ITEM 128.

ACCORDINGLY, 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 THE RECOMMENDATION THAT ITEM 128 OF CONTRACT NO. 37-0003-096 SHOULD BE CANCELED WITHOUT LIABILITY TO THE CORPORATION.