B-169026, APRIL 27, 1970, 49 COMP. GEN. 736

B-169026: Apr 27, 1970

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MISTAKE IN FACT AN AWARD FOR DICTATING EQUIPMENT TO THE APPARENT LOW BIDDER MADE ON THE BASIS OF A MISTAKE IN FACT THAT THE BIDDER'S OFFERED PRICE WAS THE LOWEST PRICE RECEIVED. WAS AN ERRONEOUS AWARD TO OTHER THAN THE LOW. AS IT IS NOT ENOUGH THAT AN AWARD BE MADE IN GOOD FAITH. THE FACT THAT THE CONTRACTOR'S REPRESENTATIVE WAS UNAWARE THAT HIS STATEMENTS WERE ERRONEOUS IS ALSO OF NO EFFECT AS THERE IS NO DIFFERENCE BETWEEN A CONTRACT ENTERED INTO UNDER A MUTUAL MISTAKE OF FACT AND ONE IN WHICH ONE PARTY CONTRACTS IN RELIANCE UPON A DELIBERATE MISREPRESENTATION BY THE OTHER. EFFECT OF CONTRACT PROTESTS AN UNSUCCESSFUL OFFEROR'S FAILURE TO REPEAT THE QUESTIONS RAISED AT THE TIME PROPOSALS WERE OPENED CONCERNING ITS COMPETITOR'S ABILITY TO FULFILL ITS REPRESENTATIONS IS NOT CONSIDERED A WAIVER OF ANY RIGHTS TO OBJECT TO THE AWARD.

B-169026, APRIL 27, 1970, 49 COMP. GEN. 736

CONTRACTS -- AWARDS -- ERRONEOUS -- MISTAKE IN FACT AN AWARD FOR DICTATING EQUIPMENT TO THE APPARENT LOW BIDDER MADE ON THE BASIS OF A MISTAKE IN FACT THAT THE BIDDER'S OFFERED PRICE WAS THE LOWEST PRICE RECEIVED, AN UNDERSTANDING INDUCED BY THE ERRONEOUS FACTUAL STATEMENTS INADVERTENTLY MADE BY THE CONTRACTOR'S REPRESENTATIVE THAT THE EQUIPMENT WOULD NOT REQUIRE THE LEASING OF DICTATING TRUNK LINES AT A MONTHLY RENTAL CHARGE, WAS AN ERRONEOUS AWARD TO OTHER THAN THE LOW, RESPONSIVE, RESPONSIBLE BIDDER, AND ALTHOUGH MADE IN GOOD FAITH THE AWARD SHOULD BE CANCELED AND THE PROCUREMENT RESOLICITED, AS IT IS NOT ENOUGH THAT AN AWARD BE MADE IN GOOD FAITH. THE FACT THAT THE CONTRACTOR'S REPRESENTATIVE WAS UNAWARE THAT HIS STATEMENTS WERE ERRONEOUS IS ALSO OF NO EFFECT AS THERE IS NO DIFFERENCE BETWEEN A CONTRACT ENTERED INTO UNDER A MUTUAL MISTAKE OF FACT AND ONE IN WHICH ONE PARTY CONTRACTS IN RELIANCE UPON A DELIBERATE MISREPRESENTATION BY THE OTHER. CONTRACTS -- AWARDS -- ERRONEOUS -- EFFECT OF CONTRACT PROTESTS AN UNSUCCESSFUL OFFEROR'S FAILURE TO REPEAT THE QUESTIONS RAISED AT THE TIME PROPOSALS WERE OPENED CONCERNING ITS COMPETITOR'S ABILITY TO FULFILL ITS REPRESENTATIONS IS NOT CONSIDERED A WAIVER OF ANY RIGHTS TO OBJECT TO THE AWARD, NOR DOES IT PRECLUDE THE OFFEROR FROM RENEWING THE COMPLAINTS WHEN THE ERRONEOUS BASIS OF THE CONTRACT AWARD IS DISCLOSED.

TO THE ADMINISTRATOR, VETERANS ADMINISTRATION, APRIL 27, 1970:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 4, 1970, WITH ENCLOSURES, FROM THE DIRECTOR OF SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, REQUESTING A DECISION AS TO WHETHER A CONTRACT ERRONEOUSLY AWARDED TO DUNSHAW OF PUERTO RICO, INC. (DUNSHAW), AN AUTHORIZED SALES AGENT OF NORTH AMERICAN PHILLIPS CORPORATION, A FEDERAL SUPPLY SCHEDULE (FSS) CONTRACTOR FOR NORELCO DICTATING EQUIPMENT, SHOULD BE CANCELED AND PLACED WITH THE LOW BIDDER, DICTAPHONE CORPORATION (DICTAPHONE), WHOSE EQUIPMENT IS ALSO COVERED BY A FSS CONTRACT.

REQUESTS FOR PROPOSALS WERE SENT TO BOTH DICTAPHONE AND DUNSHAW UNDER DATE OF OCTOBER 8, 1969, FOR REMOTE CONTROL DICTATING EQUIPMENT TO BE INSTALLED AT THE VETERANS ADMINISTRATION (VA) HOSPITAL, SAN JUAN, PUERTO RICO. BIDDERS WERE REQUESTED TO QUOTE PRICES FOR THE EQUIPMENT AS LISTED UNDER THE RESPECTIVE FEDERAL SUPPLY SCHEDULE CONTRACTS, AND TO QUOTE TRADE -IN ALLOWANCES FOR DICTATING AND TRANSCRIBING MACHINES OWNED BY THE HOSPITAL.

PROPOSALS WERE SUBMITTED ON OCTOBER 20, 1969. DICTAPHONE'S NET TOTAL AFTER TRADE-IN ALLOWANCE WAS $25,192.11. HOWEVER, DIRECTLY AFTER SUB ITEM 2 (TELEPHONE LINKS FOR EACH MACHINE) OF BOTH ITEMS I AND II, DICTAPHONE INSERTED " *** SEE NOTE." THE "NOTE" REFERRED TO STATED: "THIS ITEM IS QUOTED AS REQUESTED. HOWEVER, IF THE TELEPHONE COMPANY DICTATION TRUNK IS USED IN LIEU OF THE QUOTED LINKS, THE NET EQUIPMENT COST WOULD BE REDUCED TO $30,142.61, THEREBY PROVIDING A NET TOTAL COST OF $21,142.61." DUNSHAW'S NET TOTAL BID OFFERING NORELCO EQUIPMENT WAS $21,574.08, WITH "0" FOR SUB-ITEM 2 UNDER ITEMS I AND II.

THE CONTRACTING OFFICER, ASSUMING, APPARENTLY ON THE BASIS OF STATEMENTS BY A REPRESENTATIVE OF DUNSHAW, THAT THE NORELCO SYSTEM DID NOT REQUIRE ANY LINKAGE THROUGH THE TELEPHONE COMPANY, EVALUATED THE DICTAPHONE PROPOSAL OF $25,192.11, INCLUDING THE TELEPHONE LINKS, AS BEING ON THE SAME BASIS AS DUNSHAW'S BID AT $21,574.08. CONSEQUENTLY, THE CONTRACT WAS AWARDED TO DUNSHAW ON NOVEMBER 18, 1969, AND A PURCHASE ORDER WAS ISSUED TO THAT FIRM.

HOWEVER, IT WAS SUBSEQUENTLY DISCOVERED THAT DUNSHAW'S EQUIPMENT WILL REQUIRE THE LEASING OF DICTATION TRUNK LINKS FROM THE PUERTO RICO TELEPHONE COMPANY AT A MONTHLY RENTAL CHARGE. IN LIGHT OF THIS FACT IT BECAME APPARENT THAT, IF BIDS WERE TO HAVE BEEN EVALUATED ON AN EQUAL BASIS, DICTAPHONE'S BID SHOULD HAVE BEEN EVALUATED AT THE PRICE QUOTED IN THE NOTE IN ITS PROPOSAL FOR EQUIPMENT WITHOUT TELEPHONE LINKS, WHICH WAS LOWER THAN THE PRICE QUOTED BY DUNSHAW.

THE RECORD INDICATES THAT REPRESENTATIVES OF DUNSHAW ADVISED THE CONTRACTING OFFICER, BOTH BEFORE AND AFTER THE RECEIPT OF THE PROPOSALS, THAT THE NORELCO EQUIPMENT HAD BUILT-IN TELEPHONE LINKS, AND THAT THE CONTRACTING OFFICER UNDERSTOOD FROM THEIR STATEMENTS THAT THERE WOULD BE NO NECESSITY FOR OBTAINING ANY ADDITIONAL EQUIPMENT OR SERVICE FROM THE TELEPHONE COMPANY. THE FILE CONTAINS A REPORT DATED SEPTEMBER 2, 1969, BY A SPECIAL COMMITTEE OF HOSPITAL PERSONNEL WHO INSPECTED THE SERVICE CAPABILITIES OF DUNSHAW AND DICTAPHONE IN PUERTO RICO, WHICH INCLUDES FINDINGS THAT DICTAPHONE EQUIPMENT WOULD REQUIRE INSTALLATION AND RENTAL OF LINKS FROM THE TELEPHONE COMPANY, AND THAT THE NORELCO SYSTEM WOULD NOT.

IN THIS CASE IT IS CLEAR THAT THE AWARD TO DUNSHAW RESULTED FROM A MISTAKE OF FACT AND THAT DICTAPHONE'S OFFERED PRICE WAS LOWER THAN DUNSHAW'S. IN DECIDING WHETHER A CONTRACT AWARDED ERRONEOUSLY BUT IN GOOD FAITH TO OTHER THAN THE LOW RESPONSIVE RESPONSIBLE BIDDER SHOULD BE CANCELED, WE MUST CONSIDER ALL OF THE RELEVANT AND MATERIAL FACTORS SURROUNDING THE AWARD AND BASE OUR DECISION ON THE BEST INTERESTS OF THE UNITED STATES. IT IS NOT ENOUGH THAT THE AWARD BE MADE IN GOOD FAITH. 164826, AUGUST 29, 1968.

WE ARE SATISFIED FROM THE RECORD THAT THE AWARD RESULTED FROM ERRONEOUS FACTUAL STATEMENTS BY DUNSHAW'S REPRESENTATIVE, AND THAT THE CONTRACT AWARDED DID NOT ACCORD WITH THE CONTRACTING OFFICER'S UNDERSTANDING OR INTENTION. WHILE WE ARE INCLINED TO BELIEVE, SINCE IT APPEARS THAT NO NORELCO CENTRAL DICTATING SYSTEM HAD BEEN INSTALLED IN PUERTO RICO, THAT DUNSHAW'S REPRESENTATIVE HIMSELF WAS UNAWARE THAT HIS STATEMENTS WERE ERRONEOUS, WE SEE NO DIFFERENCE IN EFFECT BETWEEN A CONTRACT ENTERED INTO UNDER A MUTUAL MISTAKE OF FACT AND ONE IN WHICH ONE PARTY CONTRACTS IN RELIANCE UPON A DELIBERATE MISREPRESENTATION BY THE OTHER.

IN OPPOSITION TO THE DICTAPHONE PROTEST, NORELCO'S GOVERNMENT REPRESENTATIVE, MID-ATLANTIC INDUSTRIES, INC., URGES THAT THE CONTRACT AWARD SHOULD BE ALLOWED TO STAND. IN SUPPORT OF ITS CONTENTIONS IT POINTS OUT THAT THE VETERANS ADMINISTRATION SPECIFICATION X-708A, REFERENCED IN THE SOLICITATION OF PROPOSALS, INCLUDED A PARAGRAPH 3.2.1 DESCRIBING A DIAL TELEPHONE DICTATING SYSTEM THE STATEMENT, "TELEPHONE DICTATION TRUNK (LINK) IS SUPPLIED BY THE TELEPHONE COMPANY ON A RENTAL BASIS AS PART OF REGULAR TELEPHONE SERVICE, ONE LINK BEING REQUIRED FOR EACH RECORDER." THEREFORE IT IS CONTENDED THAT THE ITEMS LISTED IN THE SOLICITATION AS "TELEPHONE LINKS" CAN PROPERLY BE UNDERSTOOD AS APPLYING TO THE INTERFACE EQUIPMENT BY WHICH THE IMPULSES RECEIVED THROUGH THE TELEPHONE LINE ARE INTERPRETED AND MADE TO PRODUCE THE PROPER CONNECTIONS BETWEEN THE DICTATING AND RECORDING EQUIPMENT. SINCE THIS INTERFACE EQUIPMENT, REFERRED TO BY NORELCO AS "LINKS," IS BUILT INTO THE NORELCO UNITS, IT IS ARGUED THAT THE DUNSHAW PROPOSAL AND THE CONTRACT CONSUMMATED BY ITS ACCEPTANCE MUST BE CONSIDERED AS FULLY RESPONSIVE TO AND IN COMPLETE CONFORMITY WITH THE SOLICITATION.

WERE WE FACED WITH A QUESTION MERELY OF AN AMBIGUITY IN THE SOLICITATION, THE BIDDER'S INTERPRETATION, IF REASONABLE, MIGHT BE REGARDED AS CONTROLLING THE INTERPRETATION OF THE CONTRACT. HOWEVER, IN THE LIGHT OF OUR CONCLUSIONS STATED ABOVE AS TO THE MISLEADING EFFECT UPON THE CONTRACTING OFFICER OF THE STATEMENTS BY DUNSHAW, WE REGARD THE QUESTION AS ONE OF MISREPRESENTATION OR MUTUAL MISTAKE, GOING TO THE FORMATION OF THE CONTRACT, RATHER THAN ONE OF AMBIGUITY AFFECTING ONLY ITS INTERPRETATION.

IT IS ALSO CONTENDED THAT THE DICTAPHONE PROTEST CAME TOO LATE, AND THAT BY ITS DELAY DICTAPHONE PERMITTED THE PERFORMANCE OF THE CONTRACT TO PROCEED SO FAR THAT ITS CANCELLATION WOULD BE INEQUITABLE.

THE RECORD SHOWS THAT IN A LETTER DATED SEPTEMBER 29, 1969, JUST BEFORE THE ISSUANCE OF THE SOLICITATION FOR PROPOSALS, FROM MR. CANELLAS, MANAGER OF DICTAPHONE'S PUERTO RICO OFFICE, TO MR. BARAGA OF THE VETERANS ADMINISTRATION CENTER IN SAN JUAN, REFERENCE WAS MADE TO A PREVIOUS STATEMENT "BY THE COMPETITORS, THAT WITH THEIR EQUIPMENT NO MONTHLY RENTAL RATES WOULD HAVE TO BE PAID TO THE PUERTO RICO TELEPHONE COMPANY." COMMENTING ON THAT STATEMENT MR. CANELLAS POINTED OUT THAT "WITH OR WITHOUT A BUILT-IN DICTATION LINK A MONTHLY RENTAL RATE MUST BE PAID TO THE PUERTO RICO TELEPHONE COMPANY FOR CONNECTION TO THEIR TELEPHONE LINES."

BOTH MR. CANELLAS, IN A REPORT TO HIS OFFICE, AND THE CONTRACTING OFFICER IN HIS NARRATIVE STATEMENT OF THE FACTS, STATE THAT AT THE OPENING OF THE PROPOSALS, WHEN THE ASTERISKED NOTE IN THE DICTAPHONE PROPOSAL WAS READ, THE DUNSHAW REPRESENTATIVE STATED THAT THERE WOULD BE NO NEED FOR A TELEPHONE LINK AND NO RECURRING CHARGE WITH THE NORELCO EQUIPMENT.

SINCE THE CONTRACTING OFFICER ACCEPTED THIS REPRESENTATION AND AWARDED THE CONTRACT TO DUNSHAW WITH THAT UNDERSTANDING, DICTAPHONE FELT THAT IT WAS NOT IN A POSITION TO PROTEST FURTHER UNTIL THE NECESSITY FOR TELEPHONE CONNECTIONS ON A RENTAL BASIS WAS DISCLOSED. THE CONTRACTING OFFICER WAS NOT ADVISED AS TO THIS UNTIL ABOUT DECEMBER 20, AND DID NOT RECEIVE NORELCO'S EXPLANATION UNTIL JANUARY 26. DICTAPHONE LEARNED ABOUT THE MIDDLE OF JANUARY THAT THE TELEPHONE COMPANY HAD BEEN ASKED TO QUOTE RATES FOR THE NECESSARY SERVICE, AND ITS FORMAL PROTEST WAS MADE WITHIN TWO WEEKS THEREAFTER.

IN THE CIRCUMSTANCES, WE DO NOT FEEL THAT DICTAPHONE'S FAILURE TO REPEAT THE QUESTIONS WHICH IT HAD ALREADY RAISED CONCERNING DUNSHAW'S ABILITY TO FULFILL ITS REPRESENTATIONS SHOULD BE CONSIDERED A WAIVER OF ANY RIGHTS IT MIGHT HAVE HAD TO OBJECT TO THE AWARD, OR TO PRECLUDE IT FROM RENEWING ITS COMPLAINTS WHEN THE ERRONEOUS BASIS OF THE CONTRACT AWARD HAD BEEN DISCLOSED.

THE VA WAS ADVISED BY LETTER OF JANUARY 27, 1970, FROM MID-ATLANTIC INDUSTRIES THAT 9 OF THE 11 ITEMS INVOLVED HAD BEEN SHIPPED TO PUERTO RICO PRIOR TO THAT DATE. HOWEVER, NO MATERIAL OR WIRING HAS BEEN INSTALLED OR RECEIVED AT THE VA HOSPITAL. WHILE THE SITUATION, AS IT AFFECTS DUNSHAW, IS MOST UNFORTUNATE, WE THINK THAT THE PRIMARY CONSIDERATION IS UPHOLDING THE INTEGRITY OF THE COMPETITIVE BID SYSTEM. WE DO NOT FIND HERE A SUFFICIENT BASIS TO DEVIATE FROM THE GENERAL RULE THAT CONTRACTS ARE TO BE AWARDED TO THE LOW RESPONSIVE BIDDER. ACCORDINGLY, THE PURCHASE ORDER ISSUED TO DUNSHAW SHOULD BE CANCELED, AND IN VIEW OF THE APPARENT MISUNDERSTANDING BY BOTH THE CONTRACTING OFFICER AND DUNSHAW'S REPRESENTATIVE CONCERNING THE USE OF THE TELEPHONE COMPANY'S DICTATION TRUNK LINKS, AS WELL AS SOME UNCERTAINTY AS WHAT TELEPHONE SERVICES WOULD BE INVOLVED UNDER DICTAPHONE'S PROPOSAL, WE ARE OF THE OPINION THAT THE PROCUREMENT SHOULD BE RESOLICITED WITH APPROPRIATE CLARIFICATION AS TO THE USE OF SUCH LINKS AND A STATEMENT OF THE METHOD OF EVALUATION TO BE EMPLOYED IF PROPOSALS RECEIVED REQUIRE DIFFERENT SERVICES FROM THE TELEPHONE COMPANY.

IN REGARD TO THE QUESTION RAISED BY DICTAPHONE AS TO WHETHER THE NORELCO EQUIPMENT COMPLIES WITH THE "BUY AMERICAN ACT", 41 U.S.C. 10, WE HAVE BEEN FURNISHED A CERTIFICATION THAT THE NORELCO MODEL 2000 CENTRAL DICTATION SYSTEM AS SHOWN AND DESCRIBED ON PAGES 10 AND 11 OF GENERAL SERVICES SCHEDULE GS-00S-76538 COMPLIES WITH THE BUY AMERICAN ACT AND AS SUCH IS CONSIDERED TO BE A DOMESTIC END PRODUCT. HOWEVER, SINCE THE NORELCO FEDERAL SUPPLY SCHEDULE PRICE LIST LISTS "PHILLIPS LAMP--HOLLAND" AS THE MANUFACTURER, IT IS SUGGESTED THAT FURTHER CLARIFICATION OF THIS ASPECT OF THE PROCUREMENT BE OBTAINED UPON RESOLICITATION.

COPIES OF THIS DECISION ARE BEING FURNISHED TO BOTH DUNSHAW AND DICTAPHONE.