B-168057, OCT. 28, 1969

B-168057: Oct 28, 1969

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MARGIN AND OVERHEAD FROM ALLEGED ERRONEOUS QUOTATION WHICH WAS 18 PERCENT BELOW PRIOR CONTRACT PRICE AS WELL AS NEXT LOW PRICE QUOTED UNDER REQUEST FOR PROPOSALS. SINCE CONTRACTING OFFICER SHOULD NOT HAVE ASSUMED THAT DIFFERENCE IN PRICE WAS DUE TO UNDERCUTTING TO OBTAIN CONTRACT OR ACCEPTED QUOTED PRICE WITHOUT VERIFICATION. SHAKESPEARE: REFERENCE IS MADE TO LETTER DATED OCTOBER 3. REQUEST FOR PROPOSALS NO. 2 WAS ISSUED BY THE AMERICAN CONSULATE GENERAL. FOUR PROPOSALS WERE RECEIVED AS FOLLOWS: COMPANY PROPOSED PRICE TEXACO DH .3515 PER LITER OR $0.2619 PER GALLON ATLAS DH .4120 PER LITER OR 0.30697 PER GALLON MOBIL DH .4200 PER LITER OR 0.31293 PER GALLON SHELL DH .4245 PER LITER OR 0.31629 PER GALLON THE CONTRACT WAS AWARDED TO TEXACO AND AFTER RECEIVING THE AWARD TEXACO ALLEGED THAT IT HAD ERRONEOUSLY QUOTED ITS PRICE FOR A 35-PERCENT RESIDUAL FUEL OIL/65-PERCENT DISTILLATE GAS OIL INSTEAD OF ITS PRICE FOR A 2D (ASTM) DIESEL FUEL OIL AS REQUESTED IN THE REQUEST FOR PROPOSALS.

B-168057, OCT. 28, 1969

MISTAKES--ALLEGATION AFTER AWARD--CONTRACTING OFFICER'S ERROR DETECTION DUTY--PRICE COMPARISON WITH PRIOR PROCUREMENTS AFTER AWARD OF CONTRACT TO SUPPLY DIESEL FUEL OIL, REQUESTED PRICE INCREASE TO EQUAL COST, DELIVERY, MARGIN AND OVERHEAD FROM ALLEGED ERRONEOUS QUOTATION WHICH WAS 18 PERCENT BELOW PRIOR CONTRACT PRICE AS WELL AS NEXT LOW PRICE QUOTED UNDER REQUEST FOR PROPOSALS, MAY BE GRANTED AS RECOMMENDED BY CONTRACTING OFFICER WHICH EXCLUDES OVERHEAD AND MARGIN, SINCE CONTRACTING OFFICER SHOULD NOT HAVE ASSUMED THAT DIFFERENCE IN PRICE WAS DUE TO UNDERCUTTING TO OBTAIN CONTRACT OR ACCEPTED QUOTED PRICE WITHOUT VERIFICATION.

TO MR. SHAKESPEARE:

REFERENCE IS MADE TO LETTER DATED OCTOBER 3, 1969, FROM THE DEPUTY GENERAL COUNSEL, REQUESTING A DECISION AS TO WHETHER CONTRACT NO. IA-35 199, DATED JUNE 27, 1969, MAY BE AMENDED TO INCREASE THE PRICE SPECIFIED FOR DIESEL FUEL OIL.

REQUEST FOR PROPOSALS NO. 2 WAS ISSUED BY THE AMERICAN CONSULATE GENERAL, TANGIER, MOROCCO, ON MAY 21, 1969, REQUESTING PROPOSALS FOR FURNISHING CLEAN DIESEL FUEL OIL TYPE 2D (AMERICAN SOCIETY FOR TESTING MATERIALS (ASTM) ( TO THE VOICE OF AMERICA (VOA), TANGIER RELAY STATION. FOUR PROPOSALS WERE RECEIVED AS FOLLOWS:

COMPANY PROPOSED PRICE

TEXACO DH .3515 PER LITER OR $0.2619 PER GALLON

ATLAS DH .4120 PER LITER OR 0.30697 PER GALLON

MOBIL DH .4200 PER LITER OR 0.31293 PER GALLON

SHELL DH .4245 PER LITER OR 0.31629 PER GALLON THE CONTRACT WAS AWARDED TO TEXACO AND AFTER RECEIVING THE AWARD TEXACO ALLEGED THAT IT HAD ERRONEOUSLY QUOTED ITS PRICE FOR A 35-PERCENT RESIDUAL FUEL OIL/65-PERCENT DISTILLATE GAS OIL INSTEAD OF ITS PRICE FOR A 2D (ASTM) DIESEL FUEL OIL AS REQUESTED IN THE REQUEST FOR PROPOSALS. BY WAY OF PARTIAL RELIEF, TEXACO HAS REQUESTED THAT THE CONTRACT PRICE BE INCREASED TO DH 40.8241 PER HECTOLITER TO COVER THE TOTAL COST OF THE FUEL TO TEXACO PLUS DELIVERY CHARGES, OVERHEAD AND MARGIN. HOWEVER, THE CONTRACTING OFFICER HAS RECOMMENDED THAT THE PRICE BE INCREASED TO DH 37.0320 PER HECTOLITER WHICH EXCLUDES OVERHEAD AND MARGIN. IF MODIFICATION OF THE CONTRACT IS AUTHORIZED AS RECOMMENDED, THE CONTRACT PRICE WOULD STILL BE LOWER THAN ALL OTHER PRICES QUOTED. IN ADDITION, IT IS REPORTED THAT PRICES QUOTED FOR THE SUPPLY OF THE SAME TYPE FUEL OIL TO THE VOA TANGIER RELAY STATION DURING THE PREVIOUS CONTRACT YEAR WERE DH .4120 PER LITER AND DH .4245 PER LITER.

THE CONTRACTING OFFICER, WHILE RECOMMENDING THAT THE CONTRACTOR BE GRANTED THE RELIEF, STATES THAT HE WAS NOT ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF AN ERROR SINCE THE SPECIFICATIONS WERE CLEAR AND UNAMBIGUOUS AND TEXACO HAS PREVIOUSLY EXPRESSED A STRONG DESIRE TO BECOME A SUPPLIER AND THAT PRICE UNDERCUTTING IN THE OIL BUSINESS IS COMMON PRACTICE. THE DEPUTY GENERAL COUNSEL ALSO STATES THAT HE DOES NOT BELIEVE THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF THE MISTAKE.

THE GENERAL RULE IS THAT, WHERE A MISTAKE HAS BEEN ALLEGED AFTER AWARD, RELIEF WILL BE GRANTED ONLY IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE ERROR PRIOR TO AWARD. IN THE INSTANT CASE, WHILE IT MAY BE THAT UNDERCUTTING THE ESTABLISHED PRICES IN ORDER TO GET BUSINESS IS NOT UNCOMMON, IN VIEW OF THE NATURE OF THE COMMODITY AND THE SMALL QUANTITY OF FUEL OIL INVOLVED WE HAVE DOUBTS THAT THE CONTRACTING OFFICER SHOULD HAVE ASSUMED THAT A PRICE OF $0.045 PER GALLON LESS THAN THE SECOND LOW BID WAS DUE TO UNDERCUTTING IN ORDER TO OBTAIN A CONTRACT. SINCE THE PRICE QUOTED BY TEXACO WAS 18 PERCENT BELOW THE PRIOR CONTRACT PRICE AS WELL AS THE NEXT LOW PRICE QUOTED UNDER THE INSTANT REQUEST FOR PROPOSALS, WE THINK THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF ERROR IN THE QUOTATION OF THE CONTRACTOR AND, CONSEQUENTLY, THE PRICE QUOTED SHOULD NOT HAVE BEEN ACCEPTED WITHOUT FIRST REQUIRING VERIFICATION THEREOF. SEE B-165934, FEBRUARY 3, 1969, AND CASES CITED THEREIN.

ACCORDINGLY, THE CONTRACT MAY BE MODIFIED AS RECOMMENDED BY THE CONTRACTING OFFICER.