B-167868, APRIL 22, 1970, 49 COMP. GEN. 718

B-167868: Apr 22, 1970

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THE CONTRACTOR'S ALLEGATION OF MISTAKE IN THE CALCULATION OF THE GUARANTEED CUBIC DISPLACEMENT IN BID PREPARATION IS NOT SUSTAINED. EVEN THOUGH THE DISPLACEMENT FIGURE WAS BELOW THE GOVERNMENT'S ESTIMATE. EXHAUSTION OF REMEDIES WHERE A DISPUTE IS PENDING BEFORE A CONTRACTING OFFICER ON THE PROPRIETY OF A UNILATERAL PRICE REDUCTION BY THE GOVERNMENT OF THE DIFFERENCE BETWEEN THE ACTUAL TRANSPORTATION COSTS AND COSTS USED IN THE EVALUATION OF A BID ON CEMENT FOR SHIPMENT OVERSEAS. THE MATTER IS PROPERLY NOT FOR CONSIDERATION BY THE UNITED STATES GENERAL ACCOUNTING OFFICE AS BOTH THE CONTRACTOR AND THE GOVERNMENT ARE BOUND TO FOLLOW THE PROCEDURES SET OUT IN THE CONTRACT FOR ADMINISTRATIVE SETTLEMENT OF DISPUTES ARISING OUT OF THE CONTRACT.

B-167868, APRIL 22, 1970, 49 COMP. GEN. 718

BIDS -- EVALUATION -- DELIVERY PROVISIONS -- GUARANTEED SHIPPING WEIGHT, ETC. AN ERROR IN THE CUBIC DISPLACEMENT OF A SHIPMENT OF CEMENT TO AN OVERSEAS DESTINATION ENTITLES THE GOVERNMENT IN ACCORDANCE WITH THE MAXIMUM GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE CONTAINED IN THE INVITATION FOR BIDS TO A CONTRACT PRICE REDUCTION BETWEEN THE ACTUAL TRANSPORTATION COSTS AND THE COSTS USED TO EVALUATE THE BID. THE CONTRACTOR'S ALLEGATION OF MISTAKE IN THE CALCULATION OF THE GUARANTEED CUBIC DISPLACEMENT IN BID PREPARATION IS NOT SUSTAINED, EVEN THOUGH THE DISPLACEMENT FIGURE WAS BELOW THE GOVERNMENT'S ESTIMATE, IN VIEW OF THE FACT THAT GENERALLY BIDDERS DELIBERATELY UNDERESTIMATE GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS, AND THAT THE ADDITIONAL TRANSPORTATION COST, TAKING INTO CONSIDERATION THE BID PRICE FOR THE CEMENT, DID NOT PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR. CONTRACTS -- DISPUTES -- ADMINISTRATIVE DETERMINATIONS -- EXHAUSTION OF REMEDIES WHERE A DISPUTE IS PENDING BEFORE A CONTRACTING OFFICER ON THE PROPRIETY OF A UNILATERAL PRICE REDUCTION BY THE GOVERNMENT OF THE DIFFERENCE BETWEEN THE ACTUAL TRANSPORTATION COSTS AND COSTS USED IN THE EVALUATION OF A BID ON CEMENT FOR SHIPMENT OVERSEAS, MADE PURSUANT TO THE MAXIMUM GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE IN THE INVITATION FOR BIDS, THE MATTER IS PROPERLY NOT FOR CONSIDERATION BY THE UNITED STATES GENERAL ACCOUNTING OFFICE AS BOTH THE CONTRACTOR AND THE GOVERNMENT ARE BOUND TO FOLLOW THE PROCEDURES SET OUT IN THE CONTRACT FOR ADMINISTRATIVE SETTLEMENT OF DISPUTES ARISING OUT OF THE CONTRACT, AND THE CONTRACTOR MUST EXHAUST ITS REMEDIES UNDER THE DISPUTES CLAUSE BEFORE RESORTING EITHER TO GENERAL ACCOUNTING OFFICE OR THE COURTS.

TO EDWARD E. WHALEN, APRIL 22, 1970:

WE FURTHER REFER TO YOUR LETTERS OF SEPTEMBER 3 AND DECEMBER 15, 1969, ON BEHALF OF KAISER CEMENT & GYPSUM CORPORATION (KAISER), REQUESTING RELIEF FROM AN ALLEGEDLY ERRONEOUS COMPUTATION OF THE MAXIMUM GUARANTEED SHIPPING DIMENSIONS IN KAISER'S BID, WHICH BID IS THE BASIS OF NAVAL FACILITIES ENGINEERING COMMAND, SAN BRUNO, CALIFORNIA, CONTRACT NO. N62864-68-C- 7019.

THE FACTS OF RECORD INDICATE THAT INVITATION FOR BIDS NO. N62864-68-C 7019, AS AMENDED, WAS ISSUED TO FULFILL A REQUIREMENT FOR 115,020 BAGS OF TYPE 3 PORTLAND CEMENT. THE SPECIFICATIONS REQUIRED THE CEMENT TO BE PACKAGED IN 94-POUND BAGS AND PALLETIZED (3,834 PALLETS, EACH CONTAINING 30 BAGS OF CEMENT). INSOFAR AS IS RELEVANT HERE, ITEM 2 REQUESTED BIDDERS TO QUOTE ON AN F.O.B. ORIGIN BASIS, AND BIDDERS WERE FURTHER REQUESTED TO INDICATE THE POINT AT WHICH THE SUPPLIES WOULD BE DELIVERED TO THE GOVERNMENT. THE INVITATION ALSO CONTAINED A MAXIMUM GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE, WHICH PROVIDES AS FOLLOWS:

EACH OFFER WILL BE EVALUATED TO THE OVERSEAS DESTINATION SPECIFIED ABOVE BY ADDING TO THE F.O.B. POINT PRICE, OR TO THE WEST COAST PORT TO WHICH TRANSPORTATION CHARGES WILL BE PREPAID, ALL TRANSPORTATION COSTS TO THE OVERSEAS DESTINATION. THE GUARANTEED MAXIMUM FOR BOTH SHIPPING WEIGHT AND CUBIC DISPLACEMENT, INCLUDING PACKING, ARE REQUIRED FOR DETERMINATION OF TRANSPORTATION COSTS. OFFEROR MUST INCLUDE THIS IN THE SPACE PROVIDED BELOW. IF DELIVERED ITEMS EXCEED THE GUARANTEED MAXIMUM SHIPPING WEIGHTS OR CUBIC DISPLACEMENTS THE OFFEROR AGREES THAT THE CONTRACT PRICE SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE TRANSPORTATION COSTS COMPUTED FOR EVALUATION PURPOSES BASED ON OFFEROR'S GUARANTEED MAXIMUM SHIPPING WEIGHTS OR CUBIC DISPLACEMENTS AND THE TRANSPORTATION COSTS THAT SHOULD HAVE BEEN USED FOR EVALUATION PURPOSES BASED ON CORRECT SHIPPING DATA. (MAY 1961) TOTAL GUARANTEED MAXIMUM SHIPPING

(I) WEIGHT

(II) CUBIC DISPLACEMENT

FOUR BIDS WERE RECEIVED AND RECORDED ON NOVEMBER 13, 1967, THE SCHEDULED BID OPENING DATE. THE FIRMS RESPONDING, THE BID PRICES SUBMITTED FOR ITEM 2, THE CUBIC FOOT DISPLACEMENT GUARANTEED, AND THE GOVERNMENT'S ESTIMATES ARE AS FOLLOWS: KAISER $149,526.00 142,817 CUBIC FEET SOUTHWESTERN PORTLAND CEMENT CO. 155,495.54 167,162 CUBIC FEET AMERICAN CEMENT CORPORATION 177,933.45 158,728 CUBIC FEET OREGON PORTLAND CEMENT CO. NO BID 172,530 CUBIC FEET GOVERNMENT ESTIMATE 154,126.00 153,360 CUBIC FEET

UPON EVALUATION, AWARD WAS MADE TO KAISER ON NOVEMBER 14, 1967, AS THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER, PRICE AND OTHER FACTORS CONSIDERED. THEREAFTER, YOU ADVISE, IN YOUR LETTER OF SEPTEMBER 3, 1969, THAT ON NOVEMBER 17, 1967, A GOVERNMENT INSPECTOR APPROVED KAISER'S PROPOSED PACKAGING. PACKAGING OF THE CEMENT ACTUALLY COMMENCED ON SUNDAY, NOVEMBER 26, 1967, THE FIRST DAY PACKAGING MATERIALS WERE MADE AVAILABLE TO KAISER BY ITS SUPPLIERS. DURING THE NEXT 10 DAYS, THE CEMENT WAS PACKAGED, PALLETIZED AND LOADED ON GOVERNMENT-FURNISHED TRUCKS FOR TRANSPORT TO THE SOUTH MILITARY OCEAN TERMINAL, BAY AREA, UNITED STATES ARMY, REDWOOD CITY, CALIFORNIA. FROM DECEMBER 4 THROUGH DECEMBER 6, 1967, THE CEMENT WAS LOADED ON THE S.S. FRONTENAC VICTORY (CHARTERED BY MSTS ON A VOYAGE CHARTER WITH ATLAS STEAMSHIP COMPANY) BY A STEVEDORING COMPANY UNDER GOVERNMENT CONTRACT. DURING LOADING OPERATIONS THE STEVEDORING COMPANY QUESTIONED THE ACCURACY OF KAISER'S GUARANTEED CUBIC DISPLACEMENT. A MEASUREMENT WAS TAKEN AND IT WAS DETERMINED THAT THE CUBIC DISPLACEMENT WAS 163,715 FEET, AS OPPOSED TO THE 142,817 CUBIC FEET GUARANTEED IN KAISER'S BID. YOU ADVISE THAT THE OVERAGE IS ATTRIBUTABLE TO THE ALLEGED MISTAKE AND TO THE CUBIC DISPLACEMENT OF ADDITIONAL CEMENT VOLUNTARILY FURNISHED TO THE GOVERNMENT AT NO COST. AS A RESULT OF THIS MEASUREMENT, THE NAVAL FACILITIES ENGINEERING COMMAND ISSUED CHANGE ORDER P001, EFFECTIVE MAY 28 1968, WHICH UNILATERALLY REDUCED THE PRICE OF THE CONTRACT BY $18,364.12 TO COVER THE OVERAGE OF 20,898 CUBIC FEET.

KAISER OBJECTED TO THE ADJUSTMENT AND IN ACCORDANCE WITH DEPARTMENTAL PROCEDURES, THE MATTER WAS FORWARDED TO THE NAVAL FACILITIES ENGINEERING COMMAND, WASHINGTON, D.C., FOR A FINAL DECISION UNDER THE DISPUTES CLAUSE OF THE CONTRACT. PRIOR TO THE ISSUANCE OF A FINAL DECISION, KAISER DISCOVERED THE ALLEGED MISTAKE IN THE CALCULATION OF ITS GUARANTEED CUBIC DISPLACEMENT. BY LETTER DATED MAY 21, 1969, KAISER REQUESTED, AND THE COMMAND AGREED, THAT FURTHER CONSIDERATION OF THE DISPUTE BE SUSPENDED PENDING REFERRAL OF THE MISTAKE ISSUE TO OUR OFFICE FOR RESOLUTION.

TURNING NOW TO A CONSIDERATION OF THE ALLEGED MISTAKE, YOUR LETTER OF SEPTEMBER 3, 1969, ADVISES THAT:

*** IN MAKING ITS CALCULATIONS, KAISER HAD UTILIZED A FIGURE OF 1.0 CUBIC FEET PER 94 POUND BAG OF CEMENT. ACCORDINGLY, ITS CALCULATION WAS MADE AS FOLLOWS: PALLET

6.75 CUBIC FEET TOP .50 CUBIC FEET 30 SACKS OF CEMENT

30.00 CUBIC FEET

37.25 CUBIC FEET PER PALLET

37.25 CU. FT. X 3,834 PALLETS 142,817 CUBIC FEET

THE ACTUAL CUBE OF A 94 POUND BAG OF CEMENT IS 1.063 CUBIC FEET, BUT THIS FIGURE IS NORMALLY ROUNDED TO 1.1 CUBIC FEET FOR PURPOSES OF BID CALCULATIONS. IF KAISER HAD USED THIS FIGURE, ITS GUARANTEED CUBE MEASUREMENT WOULD HAVE BEEN CALCULATED AS FOLLOWS: PALLET

6.75 CUBIC FEET TOP .50 CUBIC FEET 30 SACKS OF CEMENT

33.00 CUBIC FEET

40.25 CUBIC FEET PER PALLET

40.25 CU. FT. X 3,834 PALLETS 154,318 CUBIC FEET

ACCORDINGLY, DUE TO AN HONEST ERROR BY KAISER, ITS GUARANTEED CUBE MEASUREMENT WAS OFF BY 11,501 CUBIC FEET.

YOU FURTHER STATE THAT KAISER HAD ASSUMED THE CUBIC MEASUREMENT TO BE 1.0 CUBIC FOOT PER 94-POUND BAG "SINCE THIS IS CLEARLY STATED ON THE CEMENT BAGS UTILIZED." USE OF THE 1.0 CUBIC FOOT PER 94-POUND BAG MEASUREMENT RESULTED IN AN EXCESS OF 11,501 CUBIC FEET (APPROXIMATELY 385.7 MEASUREMENT TONS), WHICH ACCOUNTS FOR $13,557.36 OF THE $18,364.12 PRICE ADJUSTMENT.

ALTHOUGH YOU CONTEND THAT THE USE OF THE 1.0 CUBIC-FOOT MEASURE SHOULD BE VIEWED AS AN HONEST MISTAKE, WE DO NOT BELIEVE THAT THIS VIEW MAY BE SUSTAINED IN THE PRESENT CIRCUMSTANCES. HERE, WE MUST EMPHASIZE YOUR ADVICE THAT THE ACTUAL CUBE IS NORMALLY ROUNDED OFF TO 1.1 CUBIC FEET. THAT THIS IS NOT THE INVARIABLE PRACTICE IS, OF COURSE, FURTHER EVIDENCED BY THE 1.0 CUBIC-FOOT RATE STATED ON THE PACKAGING MATERIAL USED BY KAISER. WE DO RECOGNIZE THAT OVERESTIMATING THE CUBIC DISPLACEMENT BY USE OF THE 1.1 CUBIC-FOOT RATE MIGHT BE DESIRABLE TO KAISER IN THE LIGHT OF THE POTENTIAL LIABILITY FOR ADDITIONAL TRANSPORTATION COSTS UNDER THE GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE. NEVERTHELESS, A CONCLUSION THAT THE FAILURE TO USE THE 1.1 CUBIC-FOOT RATE ESTABLISHES A MISTAKE IS, IN OUR VIEW, NEGATED BY THE FACT THAT A BIDDER MAY DELIBERATELY UNDERESTIMATE ACTUAL WEIGHTS (38 COMP. GEN. 819, 821 (1959)) OR DIMENSIONS (49 ID. 558 (1970)).

MOREOVER, EVEN ASSUMING THE MISTAKE TO BE SATISFACTORILY PROVEN, THE POSITION TAKEN BY THE NAVAL FACILITIES ENGINEERING COMMAND, WASHINGTON, D.C., IN ITS REPORT OF NOVEMBER 19, 1969, TO OUR OFFICE IS THAT THE MISTAKE SHOULD BE CONSIDERED UNILATERAL AND SHOULD NOT BE IMPUTED TO THE GOVERNMENT. IN THIS CONNECTION, IT IS NOTED THAT KAISER'S CUBIC DISPLACEMENT FIGURE WAS ONLY ABOUT 7 PERCENT BELOW THE GOVERNMENT'S ESTIMATE. YOU MAINTAIN THAT THIS DIFFERENCE IS SIGNIFICANT SINCE THE GOVERNMENT'S ESTIMATE CLOSELY APPROXIMATES THE ACTUAL CUBIC DISPLACEMENT AND FURTHER NOTE THAT ALL OTHER BIDDERS EXCEEDED THIS ESTIMATE. HOWEVER, AS WE HAVE INDICATED, SINCE A BIDDER MAY DELIBERATELY UNDERESTIMATE ITS GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS, WE DO NOT CONSIDER THE PERCENTAGE DIFFERENCE BETWEEN KAISER'S GUARANTEED DISPLACEMENT AND THE GOVERNMENT ESTIMATE TO BE CRITICAL. CF. B-154291, OCTOBER 6, 1964. THUS, WE CANNOT CONCLUDE THAT THE ADDITIONAL TRANSPORTATION COSTS REPRESENTED BY KAISER'S UNDERESTIMATE OF THE ACTUAL CUBIC DISPLACEMENT, TAKING INTO CONSIDERATION ALSO ITS BID PRICE FOR THE CEMENT, WOULD BE SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR.

IN YOUR CORRESPONDENCE YOU HAVE ALSO QUESTIONED THE PROPRIETY OF THE UNILATERAL PRICE ADJUSTMENT EFFECTED BY CHANGE ORDER P001 ON OTHER GROUNDS. AS YOU WERE ADVISED IN A MEETING ON MARCH 24, 1970, WITH A REPRESENTATIVE OF OUR OFFICE, THESE MATTERS ARE PRESENTLY PENDING BEFORE THE CONTRACTING OFFICER UNDER THE DISPUTES CLAUSE AND ARE THEREFORE NOT PROPERLY FOR CONSIDERATION BY OUR OFFICE AT THIS TIME. BOTH THE CONTRACTOR AND THE GOVERNMENT ARE BOUND TO FOLLOW THE PROCEDURES SET OUT IN THE CONTRACT FOR THE ADMINISTRATIVE SETTLEMENT OF DISPUTES ARISING OUT OF THE CONTRACT AND THE CONTRACTOR MUST EXHAUST ITS REMEDIES UNDER THE DISPUTES CLAUSE BEFORE RESORTING EITHER TO OUR OFFICE OR THE COURTS. SEE UNITED STATES V HAMMER CONTRACTING CORPORATION, 331 F. 2D 173 (1964); BEACON CONSTRUCTION COMPANY OF MASS. V UNITED STATES, 314 F. 2D 501 (1963); UNITED STATES V PETER KIEWIT SONS' CO., 345 F. 2D 879 (1965); 37 COMP. GEN. 568 (1958), AND AUTHORITIES CITED THEREIN.

FOR THE FOREGOING REASONS, YOUR REQUEST FOR RELIEF IS DENIED.

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