B-169901, JUN. 19, 1970

B-169901, JUN. 19, 1970

CONTRACTS--MISTAKES--CONTRACTOR'S ERROR DETECTION DUTY--SUPPLIER'S ERROR WHERE CONTRACTING OFFICER DID NOT REQUEST VERIFICATION OF BID WHICH WAS 93 PERCENT BELOW GENERAL SERVICES ADMINISTRATION CATALOGUE PRICE, AND AFTER AWARD CONTRACTOR FURNISHED CONVINCING EVIDENCE OF BID MISTAKE DUE TO SUPPLIER'S ERRONEOUS QUOTATION, CONTRACT MAY BE REFORMED TO REFLECT UPWARD ADJUSTMENT TO SECOND LOW BID. ALTHOUGH CONTRACTING OFFICER ORDINARILY IS NOT CHARGED WITH CONSTRUCTIVE NOTICE OF SUPPLIER'S ERROR WHICH SHOULD PLACE BIDDER ON NOTICE, IT DOES NOT BAR RELIEF WHERE ATTENDANT CIRCUMSTANCES ARE SUCH THAT IT CANNOT BE SAID THAT BID ACCEPTANCE WAS IN GOOD FAITH, WITHOUT ACTUAL OR CONSTRUCTIVE NOTICE OF ERROR. SEE COMP. GEN. DECS. AND CT. CASES CITED.

TO MR. KUNZIG:

REFERENCE IS MADE TO A LETTER DATED MAY 21, 1970, FROM MR. HART T. MANKIN, GENERAL COUNSEL, FORWARDING TO OUR OFFICE ADMINISTRATIVE DOCUMENTS RELATIVE TO THE CONTRACT AWARDED TO CONTINENTAL PAPER COMPANY (CPC) UNDER INVITATION FOR BIDS NO. F/40307-TE, ISSUED ON JANUARY 14, 1969, BY THE FEDERAL SUPPLY SERVICE, REGION 7, FORT WORTH, TEXAS. WE HAVE BEEN REQUESTED TO REVIEW AND APPROVE REFORMATION OF CPC'S CONTRACT BECAUSE OF A MISTAKE IN THE BID UPON WHICH THE AWARD WAS BASED.

THE INVITATION SOUGHT OFFERS ON TWO ITEMS: 427 ROLLS OF FEDERAL STOCK NUMBER (FSN) 8135-222-4030, CLASS H-3(A), CASE LINERS, ROLL FORM, 60 INCHES WIDE, 200 YARDS LONG; 224 ROLLS OF FSN 8135-526-1907, CLASS C-1, INTERIOR WRAPS, ROLL, 200 YARDS LONG, 72 INCHES WIDE. AT THE BID OPENING ON FEBRUARY 4, 1969, BIDS WERE RECEIVED FROM THE FOLLOWING COMPANIES IN THE INDICATED UNIT PRICES:

BIDDER ITEM 1 ITEM 2

C. J. DUFFEY PAPER COMPANY $18.18 $12.70

CONTINENTAL PAPER COMPANY 13.75 16.00

ADAMS INDUSTRIES, INC. 34.12 16.80

ACME PAPER COMPANY ----- 17.81

GLAS-KRAFT, INC. 25.80 17.47

CPC WAS AWARDED A CONTRACT ON FEBRUARY 28, 1969, FOR ITEM 1. VERIFICATION WAS REQUESTED FROM CPC, EVEN THOUGH ITS BID WAS 32 PERCENT LOWER THAN THE SECOND LOW BID AND 93 PERCENT LESS THAN THE GENERAL SERVICES ADMINISTRATION CATALOG PRICE OF $26.50. WE ARE ADVISED THAT THE SUPPLIES INVOLVED HAVE BEEN RECEIVED AND THAT PAYMENT THEREFOR HAS BEEN MADE.

SUBSEQUENT TO AWARD, CPC'S SUBCONTRACTOR INFORMED THE CONTRACTING OFFICER THAT IT HAD ERRONEOUSLY QUOTED CPC A PRICE PER HUNDREDWEIGHT RATHER THAN A PRICE PER ROLL ON ITEM 1. THE CORRECT QUOTATION SHOULD HAVE BEEN $24.70, AS OPPOSED TO ITS ACTUAL QUOTE OF $13.07. THE CONTRACTING OFFICER HAS STATED HIS OPINION, WITH WHICH WE ARE IN AGREEMENT, THAT CPC AND ITS SUBCONTRACTOR HAVE SUBMITTED CLEAR AND CONVINCING EVIDENCE THAT A MISTAKE WAS MADE. WE ALSO CONCUR IN THE ADMINISTRATIVE OPINION THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF A MISTAKE IN CPC'S BID; IN FACT, WE THINK C. J. DUFFEY'S SECOND LOW BID SHOULD ALSO HAVE BEEN SUSPECT IN VIEW OF THE FACT THAT IT WAS VERY CONSIDERABLY BELOW THE CATALOG PRICE. SEE, IN THIS CONNECTION, B-167816, SEPTEMBER 19, 1969; B-166399, APRIL 15, 1969; B-162701, NOVEMBER 13, 1967; B-151172, APRIL 8, 1963; B-144300, NOVEMBER 4, 1960; AND C. N. MONROE MANUFACTURING COMPANY V UNITED STATES (E.D. MICH; 1956), 143 F. SUPP. 449, ALL INVOLVING ACTUAL OR SUSPECTED MISTAKES IN EACH OF THE TWO LOW BIDS RECEIVED.

CERTAIN DECISIONS OF OUR OFFICE, HOWEVER, ARE INTERPRETED BY THE GENERAL COUNSEL AS PRECLUDING REFORMATION IN THE PRESENT CIRCUMSTANCES BECAUSE OF THE FACT THAT THE ERROR WAS MADE BY CPC'S SUPPLIER, AND THAT CPC THEREFORE BID EXACTLY WHAT IT INTENDED TO BID. BUT IN TWO OF THE DECISIONS CITED, B -159619, AUGUST 2, 1966, AND B-146386, SEPTEMBER 28, 1961, THE CONTRACTING OFFICER WAS NOT ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR IN THE LOW BID. FOR THIS REASON, NEITHER CASE CONSTITUTES GOVERNING PRECEDENT FOR THE INSTANT MATTER.

THE THIRD DECISION CITED IS 19 COMP. GEN. 168 (1939), WHICH, AS THE GENERAL COUNSEL NOTES, WAS JUDICIALLY OVERRULED IN KEMP V UNITED STATES (D.C. MD; 1941), 38 F. SUPP. 568. OUR DECISION IN THAT CASE WAS THOROUGHLY REVIEWED IN 38 COMP. GEN. 517 (1959), WHEREIN WE STATED AT PAGE 519:

"WHILE IT IS TRUE THAT AN ERROR IN A SUPPLIER'S QUOTATION IS NOT SUFFICIENT, BY ITSELF, TO AUTHORIZE RELIEF FROM A CONTRACT ENTERED INTO ON THE BASIS OF THAT QUOTATION, THE FACT THAT THE ERROR MAY BE DUE TO THE CONTRACTOR'S SUPPLIER IS NOT TO BE CONSIDERED AS A BAR TO RELIEF IF THE ATTENDANT CIRCUMSTANCES ARE SUCH THAT IT CANNOT BE SAID THAT THE ACCEPTANCE OF THE BID WAS IN GOOD FAITH, WITHOUT ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR. THE FACT THAT THE ERROR WAS MADE BY THE CONTRACTOR'S SUPPLIER PROPERLY CAN BE USED ONLY AS AN ADDITIONAL REASON TO SHOW THAT THE ACCEPTANCE WAS IN GOOD FAITH IN CASES WHERE THERE WAS NOTHING TO PLACE THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR. THE REASON FOR THIS IS THAT THE CONTRACTING OFFICER, IN THE ABSENCE OF OTHER CIRCUMSTANCES, MAY NOT BE CHARGED WITH CONSTRUCTIVE NOTICE OF THE SUPPLIER'S ERRORS WHEN THE CONTRACTOR ITSELF, WHO IS A REGULAR DEALER IN SUCH SUPPLIES, DID NOT SEE FIT TO QUESTION THE CORRECTNESS OF ITS SUPPLIER'S QUOTATION PRIOR TO QUOTING SUCH PRICE TO THE GOVERNMENT."

IN ACCORDANCE WITH THE ABOVE VIEWS, OUR OFFICE IN RECENT YEARS HAS PERMITTED RELIEF, WHERE OTHERWISE PROPER, IN CASES WHERE THE BIDDER'S CLAIM FOR RELIEF WAS FOUNDED UPON AN ERRONEOUS QUOTATION FROM A SUBCONTRACTOR. FOR EXAMPLE, SEE B-143887, SEPTEMBER 23, 1960; B 145234, MAY 5, 1961; B-152950, DECEMBER 20, 1963; AND B-162701, SUPRA. THEREFORE, WE PERCEIVE NO OBJECTION TO REFORMATION IN THE PRESENT CIRCUMSTANCES.

WHILE THERE IS A SUGGESTION IN THE ADMINISTRATIVE RECORD THAT THE SECOND LOW BID WAS ALSO ERRONEOUS DUE TO A MISTAKEN QUOTATION FROM A SUPPLIER, THERE IS NO CLEAR AND CONVINCING EVIDENCE THAT THERE WAS IN FACT SUCH A MISTAKE. HENCE, WE SEE NO JUSTIFICATION FOR DEPARTING FROM THE RULE WHICH LIMITS THE AMOUNT OF UPWARD ADJUSTMENT TO THE DIFFERENCE BETWEEN THE ERRONEOUS LOW BID AND THE SECOND LOW BID. SEE B-167816, SUPRA, AND CASES CITED THEREIN. IN CONSONANCE WITH THE FOREGOING, REFORMATION OF CPC'S CONTRACT IS APPROVED IN THE AMOUNT ADMINISTRATIVELY RECOMMENDED. THE FILE IS RETURNED HEREWITH.