B-168644, JANUARY 21, 1970, 49 COMP. GEN. 446

B-168644: Jan 21, 1970

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THE GOVERNMENT WAS ON CONSTRUCTIVE NOTICE OF THE ERROR FROM THE TIME OF BID OPENING AND ON ACTUAL NOTICE WITHIN 24 HOURS OF THE OPENING. REFORMATION OF THE CONTRACT BY INCREASING THE PRICE BY THE AMOUNT OF TH5 DOCUMENTED MISTAKE IS AUTHORIZED. 1970: REFERENCE IS MADE TO A LETTER DATED DECEMBER 10. THE CONTRACT WAS AWARDED PURSUANT TO AN INVITATION FOR BIDS ISSUED ON APRIL 28. THERE WERE ALSO SEVERAL ADDITIVE BID ITEMS. THE SITE FOR THIS FACILITY IS FORT DIX. THE ORIGINAL DATE FOR OPENING OF BIDS WAS MAY 28. FOUR BIDS WERE RECEIVED AND OPENED. WERE AS FOLLOWS: BIDDER BASE BID ADDITIVES TOTAL CONSTRUCTION LTD. $1. ITEM 1 WAS BROKEN DOWN INTO 11 SUBITEMS. CONSTRUCTION LTD.'S BID PRICE ON ITEM 1H WAS $207.

B-168644, JANUARY 21, 1970, 49 COMP. GEN. 446

BIDS -- MISTAKES -- CORRECTION -- CONTRACT EXECUTED PRIOR TO CORRECTION WHERE THE RECORD ESTABLISHES A MISTAKE HAD BEEN MADE IN THE LOW BID AND THAT THE INTENDED BID EXCEEDED THE BID SUBMITTED, AND THE GOVERNMENT WAS ON CONSTRUCTIVE NOTICE OF THE ERROR FROM THE TIME OF BID OPENING AND ON ACTUAL NOTICE WITHIN 24 HOURS OF THE OPENING, AND THE DOCUMENTATION OF THE MISTAKE ESTABLISHED THE EXISTENCE, NATURE, AND AMOUNT OF THE MISTAKE, WHICH AMOUNT WHEN ADDED TO THE BID PRICE DOES NOT DISPLACE THE LOW BIDDER, THE FACT THAT THE CONTRACTOR SIGNED THE CONTRACT BEFORE CORRECTION OF THE MISTAKE DOES NOT PRECLUDE ITS RIGHT TO RELIEF. BOTH THE GOVERNMENT AND THE CONTRACTOR EXPECTED THAT THE PRICE WOULD BE AMENDED AT A LATER DATE TO REFLECT THE BID PRICE INTENDED BY THE BIDDER, A PRICE ACTUALLY KNOWN TO THE CONTRACTING OFFICER AND, THEREFORE, REFORMATION OF THE CONTRACT BY INCREASING THE PRICE BY THE AMOUNT OF TH5 DOCUMENTED MISTAKE IS AUTHORIZED.

TO THE SECRETARY OF THE ARMY, JANUARY 21, 1970:

REFERENCE IS MADE TO A LETTER DATED DECEMBER 10, 1969, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, FORWARDING FOR OUR CONSIDERATION AND DECISION A REQUEST FOR REFORMATION OF CONTRACT NO. DACA51-69-C-0153 AWARDED TO CONSTRUCTION LTD. ON JUNE 30, 1969.

THE CONTRACT WAS AWARDED PURSUANT TO AN INVITATION FOR BIDS ISSUED ON APRIL 28, 1969. THE PROJECT CONSISTS GENERALLY OF A "TRAINING FACILITY - SEA" AND THE ITEMS FOR CONSTRUCTION INCLUDE LATRINES, MESS HALLS, CLASSROOM BUILDINGS, BIVOUAC SHOWERS, BLEACHER ENCLOSURES, A GAS CHAMBER, STATIONARY AND MOBILE TOWERS, AND VARIOUS PRACTICE COURSES. THERE WERE ALSO SEVERAL ADDITIVE BID ITEMS. THE SITE FOR THIS FACILITY IS FORT DIX, NEW JERSEY.

THE ORIGINAL DATE FOR OPENING OF BIDS WAS MAY 28, 1969. HOWEVER, DUE TO THE SUCCESSIVE ISSUANCE OF EIGHT AMENDMENTS TO THE INVITATION, THE BID OPENING TOOK PLACE ON JUNE 26, 1969. FOUR BIDS WERE RECEIVED AND OPENED, AND THE PRICES, TOGETHER WITH THE GOVERNMENT ESTIMATE, WERE AS FOLLOWS:

BIDDER BASE BID ADDITIVES TOTAL

CONSTRUCTION LTD. $1,167,500 $456,200 $1,623,700

C.W.C. ASSOCIATES, INC. 1,429,000 628,000 2,057,000

KEANE CONSTRUCTION CO., INC. 1,763,516 1,320,905 3,084,421

ALPS CONSTRUCTION CORP. 1,774,300 1,004,500 2,778,800

GOVERNMENT ESTIMATE 1,400,647 629,460 2,030,107

THE BASE BID CONSISTED OF TWO PRIMARY ITEMS, NUMBERED 1 AND 2. ITEM 1 WAS BROKEN DOWN INTO 11 SUBITEMS, LETTER "A" THROUGH "K." CONSTRUCTION LTD.'S BID PRICE ON ITEM 1H WAS $207,000, AND ON ITEM 1I IT WAS $164,500. THE ABSTRACT OF BIDS DISCLOSES THAT C.W.C. OFFERED $260,000 AND $196,000 ON 1H AND 1I, RESPECTIVELY. KEAN'S BID ON THESE TWO ITEMS WAS $315,479 AND $246,674; ALPS QUOTED A PRICE OF $331,000 ON 1H AND $210,000 ON 1I. THE GOVERNMENT ESTIMATED A PRICE OF $298,326 FOR THE FORMER AND $245,174 ON THE LATTER.

THE CONTRACTING OFFICER HAS REPORTED THAT MR. PAUL CRADDOCK, PRESIDENT OF CONSTRUCTION LTD., WAS PRESENT AT THE BID OPENING. IN VIEW OF THE SUBSTANTIAL DISPARITY BETWEEN THE LOW BID AND THE OTHER THREE BIDS, AND ALSO BECAUSE OF THE SIZABLE DIFFERENCE BETWEEN THE LOW BID AND THE GOVERNMENT'S ESTIMATE, MR. CRADDOCK WAS AT ONCE INFORMALLY ADVISED THAT HE WOULD BE REQUESTED TO VERIFY HIS BID. MR. CRADDOCK REPORTEDLY STATED THAT HE WAS NOT AT THAT TIME AWARE OF ANY MISTAKE, BUT HE PROMISED TO CHECK HIS BID.

LATER IN THE DAY, A TELEGRAM WAS SENT TO THE LOW BIDDER; IT STATED:

IN VIEW OF THE SUBSTANTIAL DISCREPANCY BETWEEN YOUR BID FOR

CONSTRUCTION OF TRAINING FACILITY--SEA, FORT DIX, N.J., IFB NO.

DACA 51-69-B-0056, AND THE GOVERNMENT ESTIMATE AND THE OTHER BIDDERS,

IT IS REQUESTED THAT YOUR BID BE PROMPTLY CONFIRMED.

ON THE MORNING OF JUNE 27, 1969, MR. CRADDOCK TELEPHONED THE CONTRACTING OFFICER TO INFORM HIM OF THE DISCOVERY OF A $65,000 ERROR CAUSED BY THE FAILURE TO INCLUDE THE COST OF MECHANICAL WORK IN ITEMS 1H AND 1I OF THE BASE BID. MR. CRADDOCK ALSO SAID THAT HIS REVIEW WAS NOT YET COMPLETE AND THAT HE WOULD SUBMIT A WRITTEN CLAIM OF MISTAKE AS SOON AS POSSIBLE. SUBSEQUENTLY, BUT ALSO ON JUNE 27, A LETTER SIGNED BY MR. CRADDOCK WAS HAND-DELIVERED TO THE CONTRACTING OFFICER. ENCLOSED WERE COPIES OF THE BID CALCULATION SUMMARY SHEETS FOR ALL ITEMS OF THE BASE BID, AS WELL AS COPIES OF THE DETAILED LABOR AND MATERIAL COMPUTATIONS FOR THE OMITTED WORK. THE LETTER RECOUNTS IN BRIEF HOW THE ERROR AROSE AND STATES THE AMOUNT OF THE ERROR ON ITEM 1H TO BE $29,478, AND ON ITEM 1I TO BE $36,363, FOR A TOTAL ERROR OF $65,841. THE LETTER CONCLUDES:

*** IN VIEW OF THE EXPRESSED URGENCY OF THIS MATTER, TIME DOES NOT PERMIT REPRODUCTION OF THE BALANCE OF DETAILED SUPPORTING DATA WITH APPROPRIATE CERTIFICATIONS, AND INCLUSION IN THIS LETTER. HOWEVER, IT WILL BE DELIVERED TO YOUR OFFICES ON MONDAY 30 JUNE 1969.

WITH RECOGNITION GIVEN TO THE FACT THAT TIME WILL NOT PERMIT RESOLUTION OF THIS MATTER PRIOR TO AWARD, THIS IS TO CONFIRM THAT WE ARE WILLING TO ACCEPT AND BE BOUND BY AN AWARD MADE ON THE BID PRICES CONTAINED IN OUR BID PRIOR TO THE PROCESSING OF OUR CLAIM OF MISTAKE IN BID, WITHOUT PREJUDICE, HOWEVER, TO OUR SAID CLAIM AS STATED ABOVE AS TO OUR RIGHT TO A CORRECTION OF SAID MISTAKE INVOLVING AN AMOUNT NOT EXCEEDING $65,841.

ON JUNE 30, 1969, THE CONTRACTING OFFICER WROTE A LETTER TO CONSTRUCTION LTD. ACCEPTING THE BID, WITH THE EXCEPTION OF THE LAST TWO ADDITIVE ITEMS, IN THE TOTAL AMOUNT OF $1,498,000. THE LETTER CONTINUED:

THIS AWARD IS WITHOUT PREJUDICE TO YOUR RIGHT TO PROCESS YOUR MISTAKE IN BID CLAIM, IN THE AMOUNT OF $65,841, THROUGH THE CHIEF OF ENGINEERS TO THE COMPTROLLER GENERAL.

CONTRACT NO. DACA51-69-C-0153 HAS BEEN ASSIGNED TO THIS AWARD.

IT IS REQUESTED THAT YOU EXECUTE AND RETURN THE ENCLOSED DOCUMENTS IN ACCORDANCE WITH THE INDICATED INSTRUCTIONS IN THE ATTACHED "DOCUMENT AND INSTRUCTION SHEET."

BY LETTER DATED JULY 1, 1969, MR. WILLIAM GRAY, VICE PRESIDENT OF THE CONTRACTOR, FORWARDED TO THE CONTRACTING OFFICER THE ORIGINAL WORKSHEETS FOR ITEMS 1H AND 1I OF THE BASE BID, AND THE AFFIDAVITS OF HIMSELF AND MR. WILLIAM C. DAY, A MECHANICAL ENGINEER EMPLOYED BY THE CONTRACTOR. THESE DOCUMENTS ARE FURTHER EVIDENCE OF THE AMOUNT OF THE BID ACTUALLY INTENDED. MR. GRAY'S AFFIDAVIT INDICATES THAT THE AMOUNT OF THE ERROR WAS $66,054. THE ERROR ON ITEM 1H WAS COMPUTED TO BE $29,556, WHILE THE MISTAKE AS TO ITEM 1I WAS CALCULATED AT $36,498.

IN A LETTER OF JULY 8, 1969, MR. GRAY EXPLAINED THAT HIS JULY 1 AFFIDAVIT HAD FAILED TO TAKE INTO ACCOUNT THE ROUNDING OF WORKSHEET ESTIMATES TO AN EVEN HUNDRED DOLLARS, A PROCEDURE WHICH IS READILY APPARENT FROM A COMPARISON OF BID ESTIMATE SHEETS WITH ACTUAL BID PRICES FOR EACH INDIVIDUAL ITEM. HE SAID THAT, FOLLOWING THIS PROCEDURE, CONSTRUCTION LTD. WOULD HAVE SUBMITTED A BID PRICE OF $236,500 ON ITEM 1H AND $201,000 ON 1I. ACCORDINGLY, HE RELATED THAT THE EXACT DIFFERENCE BETWEEN THE BID AS SUBMITTED AND THE INTENDED BID WAS $66,000. HE FURTHER STATED:

*** THIS TOTAL CLOSELY APPROXIMATES THAT OF OUR INITIAL COMPUTATION OF $65,841.00 ARRIVED AT SOLELY BY APPLICATION OF MARK-UPS TO OMITTED DIRECT COSTS. AS OUR RESERVATION OF RIGHTS HAS ALREADY BEEN STATED IN THE LATTER AMOUNT, HOWEVER, IT IS THAT AMOUNT FOR WHICH BID CORRECTION IS REQUESTED.

THE CONTRACTING OFFICER HAS FOUND THE EVIDENCE OF RECORD TO ESTABLISH CLEARLY THAT CONSTRUCTION LTD. MADE A MISTAKE IN ITS BID AS SUBMITTED AND THAT THE INTENDED BID EXCEEDED THAT ACTUALLY SUBMITTED BY $66,000. WE ARE IN AGREEMENT WITH THAT CONCLUSION. THE RECORD ALSO CLEARLY REVEALS THAT THE GOVERNMENT WAS ON CONSTRUCTIVE NOTICE OF THE MISTAKE FROM THE TIME BIDS WERE OPENED AND THAT IT RECEIVED ACTUAL NOTICE OF THE ERROR WITHIN 24 HOURS OF THE OPENING. CERTAIN DOCUMENTATION TENDING TO ESTABLISH THE EXISTENCE AND NATURE OF THE MISTAKE, AS WELL AS AN ESTIMATE OF THE AMOUNT OMITTED, WAS PROVIDED ON JUNE 27, 1969. FURTHER, THE LOW BIDDER HAD IN ITS LETTER EXPRESSLY QUANTIFIED THE AMOUNT OF THE MISTAKE AT $65,841, AND IF SUCH AMOUNT WERE ADDED TO THE WRITTEN BID, THERE WOULD STILL BE A SUBSTANTIAL DIFFERENCE BETWEEN THE TWO LOWEST BIDS RECEIVED.

THE RULE GENERALLY APPLICABLE TO SUCH CIRCUMSTANCES IS THAT ACCEPTANCE BY THE GOVERNMENT OF A BID, WHERE THE CONTRACTING OFFICER IS ON ACTUAL OR CONSTRUCTIVE NOTICE THAT THE BID DOES OR MAY CONTAIN AN ERROR, DOES NOT CONSUMMATE A BINDING CONTRACT. B-165127, OCTOBER 3, 1968, AND CASES CITED THEREIN. WE BELIEVE THAT SINCE THERE WAS ACTUAL NOTICE OF THE MISTAKE AT THE TIME THE AWARD WAS MADE, THE CONTRACT IS PROPERLY SUBJECT TO REFORMATION SO THAT IT MAY EXPRESS THE ACTUAL INTENT OF THE PARTIES AS TO THE PRICE TO BE PAID FOR THE WORK PERFORMED, PROVIDED THE ADJUSTED PRICE DOES NOT EXCEED THE PRICE OF THE NEXT LOW CORRECT BID. THIS CONCLUSION IS, WE THINK, FULLY INDICATED BY ALL THE FACTS AND CIRCUMSTANCES. ONLY ONE MATTER REQUIRES PARTICULAR ATTENTION: THE EFFECT OF THE CONTRACTOR'S ACCEPTANCE OF AN AWARD AFTER ITS ALLEGATION OF A MISTAKE BUT PRIOR TO THE CORRECTION THEREOF.

THE QUESTION HAS BEEN CONSIDERED IN A LAW REVIEW ARTICLE BY MR. MARSHALL J. DOKE, JR., ENTITLED "MISTAKES IN GOVERNMENT CONTRACTS- ERROR DETECTION DUTY OF CONTRACTING OFFICERS," 18 S. W. L. J. 1 (1964). THE AUTHOR WROTE AT PAGES 40-41:

ONE IMPORTANT PROBLEM CONCERNS THE CONTRACTOR'S EXECUTION OF A FORMAL CONTRACT OR PERFORMANCE AFTER ALLEGATION OF ERROR AS AFFECTING THE CONTRACTOR'S RIGHT TO RELIEF FOR MISTAKE. MANY CASES SUGGEST THAT SUCH ACTION PRECLUDES ANY RELIEF FOR MISTAKE, BUT OTHER CASES SUGGEST TO THE CONTRARY. *** THERE IS AN EXCEPTION, HOWEVER, IF THE CONTRACTING OFFICER ASSURES THE CONTRACTOR THAT THE BID WILL BE CORRECTED. THIS WRITER BELIEVES THAT ANY LIMITATION UPON THE AVAILABLE RELIEF FOR MISTAKES BECAUSE OF EXECUTION OR PERFORMANCE OF A CONTRACT IS BOTH INAPPROPRIATE AND UNNECESSARY. IT IS INAPPROPRIATE SINCE IT TENDS TO ENCOURAGE--INDEED, COMPEL--CONTRACTORS TO DELAY PERFORMANCE UNTIL THE LEGAL ISSUES ARE RESOLVED, AND SUCH DELAYS ARE NOT IN THE PUBLIC INTEREST IF THEY ARE UNNECESSARY TO PROTECT THE GOVERNMENT'S RIGHT. THE DELAYS ARE UNNECESSARY IN VIEW OF THE OTHER LIMITATIONS DISCUSSED HEREAFTER. ***

IN OUR DECISION B-161024, JULY 3, 1967, WE HAD OCCASION TO DECIDE THE QUESTION, AND WE HAD THIS TO SAY:

IN A SITUATION WHERE A BIDDER SIGNS A CONTRACT BASED ON A BID WHICH HE KNOWS TO BE ERRONEOUS AND THE CONTRACTING OFFICER LATER REFUSES TO ADMIT THAT A BONAFIDE MISTAKE WAS MADE, RELIEF GENERALLY WILL NOT BE GRANTED SINCE THE GOVERNMENT AND THE CONTRACTOR WERE NOT MISLED INTO ENTERING INTO A CONTRACT DIFFERENT FROM THAT WHICH THEY INTENDED. MASSMAN CONSTRUCTION COMPANY V UNITED STATES, 102 CT. CL. 699; 31 COMP. GEN. 384. HOWEVER, IN THE PRESENT CASE YOUR FIRM NOT ONLY ALLEGED THE MISTAKES PROMPTLY AFTER BID OPENING AND PRIOR TO AWARD, AND IMMEDIATELY PRESENTED CONVINCING EVIDENCE SHOWING THAT THE MISTAKES WERE MADE, HOW THEY OCCURRED, AND WHAT THE BID PRICE WOULD HAVE BEEN EXCEPT FOR THE MISTAKES, BUT THE CONTRACTING OFFICER WAS OF THE OPINION THAT THE MISTAKES HAD BEEN MADE. IT WOULD THEREFORE APPEAR THAT, HAD YOU SO CHOSEN, YOU COULD HAVE OBTAINED AN INCREASE IN THE BID PRICE THROUGH THE NORMAL MISTAKE IN BID PROCEDURE. WHILE YOU CHOSE TO ACCEPT THE CONTRACT AT THE BID PRICE, IT CANNOT BE SAID THAT YOU WAIVER ANY RIGHTS IN THE MATTER, SINCE BY THE TERMS OF THE CONTRACT WHICH SETS FORTH THE FINAL UNDERSTANDING OF THE PARTIES IT WAS MUTUALLY AGREED THAT THE CONTRACT AMOUNT WAS SUBJECT TO POSSIBLE REVISION UPWARD BY THE GENERAL ACCOUNTING OFFICE, THUS IN EFFECT PRESERVING YOUR RIGHT, IF ANY, TO HAVE A CORRECTION IN PRICE. SEE EDMUND J. RAPPOLI COMPANY, INC. V UNITED STATES, 98 CT. CL. 499; 38 COMP. GEN. 678. ALSO, SEE B-145208, APRIL 4, 1961; B-124826, AUGUST 10, 1955.

THE CONTRACT IN THAT CASE SPECIFICALLY PROVIDED THAT IT WAS SUBJECT TO A POSSIBLE UPWARD REVISION, NOT TO EXCEED $60,520, PURSUANT TO A POSSIBLE APPLICATION TO OUR OFFICE FOR CORRECTION DUE TO A MISTAKE IN THE BID. DO NOT CONSIDER THE DIFFERENCE BETWEEN SUCH A SPECIFIC RESERVATION OF RIGHTS AND THE FACTS OF THIS CASE TO BE MATERIAL. THE ACTUAL INTENT OF THE PARTIES IS CLEARLY DEMONSTRATED BY THE ABOVE QUOTATIONS FROM THE CONSTRUCTION LTD. LETTER OF JUNE 27 AND THE JUNE 30 LETTER OF ACCEPTANCE. IT CANNOT BE SUCCESSFULLY ARGUED THAT THE CONTRACTOR WAIVED ITS RIGHTS BY SIGNING THE CONTRACT. NEITHER PARTY ENTERED INTO THE CONTRACT WITH THE UNDERSTANDING THAT THE FULL AND COMPLETE PRICE WAS TO BE $1,498,000. THE CONTRARY, BOTH THE GOVERNMENT AND CONSTRUCTION LTD. EXPECTED THAT THE PRICE TERM WOULD BE AMENDED AT A LATER DATE TO REFLECT THE BID PRICE ACTUALLY INTENDED BY THE BIDDER AND ACTUALLY KNOWN BY THE CONTRACTING OFFICER. ACCORDINGLY, REFORMATION OF CONTRACT NO. DACA51-69-C-0153, BY INCREASING THE PRICE BY $65,841, IS AUTHORIZED. THE FILE IS RETURNED AS REQUESTED.