B-168347, NOV. 25, 1969

B-168347, NOV. 25, 1969

SALES--BIDS--MISTAKES--CONTRACTING OFFICER'S ERROR DETECTION DUTY CONCERNING BIDDER'S ALLEGED MISTAKES IN BIDS METAL SCRAP ITEMS 9 AND 99 IN SURPLUS SALE, WHERE CONTRACT FOR ITEM 9 IS REPRESENTED TO BE AT PRICE INTENDED FOR NICKEL, IRON ITEM 48 AND PRICE WAS THREE TIMES HIGHER THAN NEXT ITEM, ITEM 9 MAY BE DELETED FROM CONTRACT SINCE PRICE DISPARITY AND UNRELIABILITY OF CURRENT MARKET APPRAISAL SHOULD HAVE PLACED SALES CONTRACTING OFFICER ON NOTICE OF PROBABLE ERROR AND CONFIRMATION SHOULD HAVE BEEN REQUESTED; HOWEVER, BID ON ITEM 99 WAS ONLY 1.05 TIMES HIGHER THAN NEXT BID AND THERE WAS NO RECENT SALES HISTORY FOR SIMILAR SCRAP SO THERE WAS NOTHING TO ALERT OFFICER OF POSSIBLE ERROR IN BID FOR CONTRACTED ITEM 99.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO LETTER DSAH-G DATED NOVEMBER 10, 1969, WITH ENCLOSURES, FROM MR. JOHN J. NORMAN, OFFICE OF COUNSEL, REQUESTING OUR DECISION AS TO WHETHER ITEMS 9 AND 99 OF SALES CONTRACT NO. 44-0008 059, AWARDED JULY 25, 1969, TO SCHNITZER STEEL PRODUCTS OF CALIFORNIA, INC., BY THE DEFENSE SURPLUS SALES OFFICE, OAKLAND, CALIFORNIA, MAY BE RESCINDED BECAUSE OF MISTAKES IN BID ALLEGED AFTER AWARD.

ITEMS 9 AND 99 WERE DESCRIBED AS FOLLOWS:

"9. IRON AND HIGH TEMPERATURE ALLOY, SCRAP: CONSISTING OF J47 SHAFT AND WHEEL WITH BLADES. ITEM CONSISTS OF AN IRON SHAFT, HIGH TEMPERATURE ALLOY (GROUP 7, 1-25 PERCENT NI, 8-16 PERCENT CR.) CENTREX AND HIGH TEMPERATURE ALLOY (GROUP 9, 20 PERCENT NI, 20 PERCENT CR, 40 PERCENT CO) ROTOR BLADES. OUTSIDE, YARD 21 - PACKED IN WOOD BOXES WHICH ARE INCLUDED IN THE TOTAL WEIGHT AND SALE.

11,000 POUND

"99. STEEL, HEAVY, UNPREPARED, SCRAP: INCLUDING CUT RAILROAD FLAT CARS, RAILROAD SPIKES, RAILS, SPRINGS AND WHEELS; INCLUDING SOME CAST IRON. OUTSIDE.

75 GROSS TON"

SUBSEQUENT TO ACCEPTANCE OF ITS HIGH BIDS ON ITEMS 9 AND 99, SCHNITZER, BY TELEPHONE CONVERSATION, AS CONFIRMED BY LETTER OF JULY 28, 1969, ALLEGED MISTAKE IN ITS BID ON ITEMS 9 AND 99. THE CONTRACTOR ADVISED THAT ITS BID OF $0.2367 PER POUND ON ITEM 9 WAS INTENDED FOR ITEM 48 COVERING NICKEL, IRON SCRAP. THE CONTRACTOR ALSO ADVISED THAT IT OVERBID ITEM 99 BECAUSE IT OVERLOOKED THE WORD "UNPREPARED" IN THE ITEM DESCRIPTION. VIEW OF THESE ALLEGED ERRORS, RESCISSION OF THE CONTRACT IS REQUESTED BY SCHNITZER.

THE EXISTENCE OF THE ALLEGED MISTAKES IS NOT EVIDENT ON THE FACE OF THE BID ITSELF AS THE UNIT PRICES AND EXTENSIONS ARE CORRECTLY ENTERED BASED ON THE WEIGHT OF THE PROPERTY OFFERED. COMPARISON OF THE THREE BIDS RECEIVED ON ITEM 9 REVEALS THAT THE BID OF $0.2367 SUBMITTED BY SCHNITZER IS THREE TIMES HIGHER THAN THE NEXT BID OF $0.07819. IF IT HAD BEEN APPLIED TO ITEM 48 AS INTENDED, THE BID WOULD NOT HAVE BEEN HIGH BUT WOULD HAVE BEEN MORE IN LINE WITH OTHER BIDS RECEIVED ON THAT ITEM. ITS UNIT PRICE BID OF $15 ON ITEM 99, HOWEVER, IS ONLY 1.05 TIMES HIGHER THAN THE NEXT BID OF $14.29 AND IS CONSIDERED TO BE IN LINE WITH THE OTHER BIDS RECEIVED ON THAT ITEM.

THE RECORD DISCLOSES A GREAT VARIANCE BETWEEN THE AWARD PRICE ON ITEM 9 AND THE OTHER TWO BIDS RECEIVED. THE CONTRACT PRICE IS MORE THAN 200 PERCENT HIGHER THAN THE NEXT HIGHEST BID AND THE DEFENSE LOGISTICS SERVICES CENTER (DLSC) TRADE SPECIALIST IN SCRAP METAL ADVISES THAT THE CURRENT MARKET APPRAISAL OF $0.38 PER POUND FOR THE ITEM WAS UNREALISTIC AND FAR OUT OF PROPORTION TO THE ITEM'S ACTUAL VALUE WHICH SOLD AT $0.18487 PER POUND PREVIOUSLY. FURTHER, THE AWARD BY THE SALES CONTRACTING OFFICER AT A PRICE SUBSTANTIALLY LOWER THAN THE CURRENT MARKET APPRAISAL WOULD INDICATE THAT THE OFFICER WAS AWARE THAT THE CURRENT MARKET APPRAISAL WAS UNREALISTIC. SINCE IT IS GENERALLY ACCEPTED THAT BIDS ON SCRAP PROPERTY DO NOT VARY AS GREATLY AS DO BIDS ON USEABLE PROPERTY AND IN VIEW OF THE SUBSTANTIAL VARIANCE PRESENT IN THIS CASE, IT IS SUBMITTED BY THE COUNSEL FOR DLSC THAT THE COMPARISON OF THE THREE BIDS RECEIVED ON ITEM 9 SHOULD HAVE REVEALED THE POSSIBILITY OF A MISTAKE. IS, THEREFORE, THE OPINION OF THE COUNSEL THAT THE SALES CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF ERROR IN BID ON ITEM 9 AND HE SHOULD HAVE SOUGHT VERIFICATION THEREOF PRIOR TO AWARD. VIEW THEREOF, DLSC RECOMMENDS THAT THE CONTRACTOR'S REQUEST FOR RESCISSION ON THIS ITEM BE ALLOWED.

WE AGREE THAT THE DISPARITY BETWEEN SCHNITZER'S HIGH BID AND THE OTHER BIDS RECEIVED ON ITEM 9, AND THE UNRELIABILITY OF THE CURRENT MARKET APPRAISAL, SHOULD HAVE PLACED THE SALES CONTRACTING OFFICER ON NOTICE OF PROBABILITY OF ERROR AND THEREFORE BID CONFIRMATION SHOULD HAVE BEEN REQUESTED. B-160704, FEBRUARY 16, 1967; B-158334, JANUARY 21, 1966.

CONCERNING ITEM 99, IT APPEARS THAT SCHNITZER'S UNIT BID PRICE OF $15 PER TON WAS ONLY 1.05 TIMES HIGHER THAN THE NEXT HIGH BID OF $14.29. THE SALES CONTRACTING OFFICER CONSIDERED THE $15 BID IN LINE WITH THE OTHER BIDS RECEIVED ON ITEM 99 WHICH RANGED FROM $10.39 TO $8.32 PER TON. RECENT SALES HISTORY OR EXPERIENCE IS RECORDED FOR SCRAP SIMILAR TO THAT OFFERED IN ITEM 99. IN VIEW THEREOF, THERE WAS NOTHING TO ALERT THE SALES CONTRACTING OFFICER AS TO THE POSSIBILITY OF ERROR AS TO SCHNITZER'S BID ON ITEM 99. 23 COMP. GEN. 596 (1944).

ACCORDINGLY, ITEM 9 ONLY MAY BE DELETED FROM THE CONTRACT WITHOUT LIABILITY TO SCHNITZER.