B-170288, SEP. 10, 1970

B-170288, SEP. 10, 1970

CONTRACTS - MISTAKES AUTHORIZING UPWARD PRICE REVISION UNDER CONTRACT BETWEEN BUREAU OF INDIAN AFFAIRS AND FLEXI-PANEL CORPORATION FOR PREFABRICATED HOUSED ON BASIS OF MISTAKE. WHERE AFTER AWARD OF CONTRACT ON BASIS OF UNIT PRICE RATHER THAN EXTENDED PRICE, CONTRACTOR ALLEGES THAT UNIT PRICE WAS ERRONEOUS AND RECORDS SHOW THAT ONLY OTHER BIDDER HAD SUBSTANTIALLY HIGHER PRICE AND THAT CONTRACTOR'S PRICE ON PREVIOUS YEAR'S PROCUREMENT WAS HIGHER, CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF PROBABILITY OF ERROR AND REQUESTED VERIFICATION ON BASIS OF RECORD INDICATING ERROR AND ESTABLISHING INTENDED BID PRICE AMENDMENT TO CONTRACT IS AUTHORIZED.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF JULY 29, 1970, WITH ENCLOSURES, FROM LAWRENCE H. DUNN, ASSISTANT SECRETARY FOR ADMINISTRATION, SUBMITTING FOR OUR CONSIDERATION A REQUEST FOR AN UPWARD REVISION IN THE PRICE OF CONTRACT NO. H50C14207014, BASED ON A MISTAKE IN BID ALLEGED AFTER AWARD BY THE CONTRACTOR, FLEXI-PANEL CORPORATION.

INVITATION FOR BIDS (IFB) NO. 1969, UNDER WHICH THE CONTRACT WAS AWARDED, WAS ISSUED ON FEBRUARY 4, 1970, BY THE BUREAU OF INDIAN AFFAIRS, PHOENIX AREA OFFICE, BRANCH OF PROPERTY AND SUPPLY, AND CALLED FOR BIDS ON EIGHT PREFABRICATED HOUSES, IN HOUSE KIT FORM. UNDER ITEM 1 THE KITS WERE REQUIRED TO BE AIRLIFTED TO THE BUILDING SITE AT SUPAI, ARIZONA, AND UNDER THE ALTERNATE BID, ITEM 1A, TO BE DELIVERED F.O.B. HILLTOP, ARIZONA, WITH MATERIAL PACKAGED FOR AIRLIFT TO SUPAI, ARIZONA. WHEN BIDS WERE OPENED ON FEBRUARY 25, 1970, THE LOW BIDS ON ITEMS 1 AND 1A WERE THOSE SUBMITTED BY FLEXI-PANEL CORPORATION AS FOLLOWS:

QUANTITY UNIT UNIT PRICE AMOUNT

ITEM 1 8 EA. $8,237.00 $73,896.00

ITEM 1A 8 EA. 7,537.00 60,296.00

THE ONLY OTHER BIDDER WAS CAMCO PRODUCTS, INC., WHOSE UNIT AND TOTAL BID PRICES FOR ITEM 1 WERE $19,000 AND $152,000, RESPECTIVELY.

IN VIEW OF THE PROVISIONS OF PARAGRAPH 2(C) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS ADVISING THAT THE UNIT PRICE SHOULD GOVERN IN THE EVENT OF DISCREPANCY IN THE TOTAL PRICE, THE PROCURING ACTIVITY MULTIPLIED FLEXI-PANEL'S UNIT PRICE ON ITEM 1 BY 8, AND CONTRACT NO. H50C14207014 WAS AWARDED TO FLEXI-PANEL ON MARCH 5, 1970, FOR $65,896.00, INSTEAD OF THE $73,896.00 EXTENDED PRICE STATED IN THE CORPORATION'S BID. ON MARCH 6, 1970, THE PRESIDENT OF FLEXI-PANEL, MR. KARL S. GUELICH, NOTIFIED THE PROCURING ACTIVITY THAT THE CORPORATION HAD MADE A MISTAKE IN ITS BID PRICE. THE CORPORATION WAS ADVISED TO SUBMIT EVIDENCE IN SUPPORT OF THE CLAIMED ERROR, WHICH INFORMATION WAS RECEIVED BY THE PROCURING ACTIVITY ON MARCH 10, 1970.

THE CORPORATION CLAIMS A MATHEMATICAL ERROR WAS MADE IN TOTALING THE AMOUNT FOR EACH SINGLE UNIT AND INSTEAD OF $8,237.00 PER UNIT FOR ITEM 1 THE BID SHOULD HAVE BEEN $9,237.00 PER UNIT. IN SUPPORT OF ITS CLAIM THE CORPORATION HAS SUBMITTED A TELEGRAM AND A LETTER FROM GRAND CANYON HELICOPTERS DATED FEBRUARY 24, 1970, CONFIRMING A $1,650.00 PER UNIT HELICOPTER TRANSPORTATION CHARGE FOR DELIVERY OF THE HOUSE KITS TO SUPAI, ARIZONA. A HANDWRITTEN NOTE ON THE BOTTOM OF THE TELEGRAM OVER THE INITIALS "KG" STATES: "ADD $50.00 PER HOUSE FOR NEWS & OFFICIALS." MR. GUELICH CLAIMS HE ADDED THIS NOTATION SO AS TO PROVIDE AN ADDITIONAL $50.00 FOR EACH HOUSE TO COVER TRIPS FOR THE PRESS, NEWS MEDIA, AND OTHER GOVERNMENT OFFICIALS. HE ARGUES THAT THIS $50.00 PER UNIT, ADDED TO THE $1,650.00 PER UNIT GRAND CANYON HELICOPTER CHARGE, TOTALS $1,700.00, WHICH HE SHOULD HAVE ADDED TO THE COST OF EACH UNIT UNDER ITEM 1. HE EMPHASIZES THAT UNDER ITEM 1A THE BASE PRICE SUBMITTED WAS $7,537.00 FOR EACH UNIT OR A TOTAL OF $60,296 FOR ALL 8 UNITS AND HELICOPTER FLIGHT DELIVERY WAS NOT NECESSARY. MR. GUELICH CONCLUDES THAT BY ADDING THE $1,700.00 HELICOPTER SERVICES TO THE BASE PRICE OF $7,537.00 PER UNIT YOU ARRIVE AT THE CORRECT TOTAL OF $9,237.00 PER UNIT OR $73,896.00 FOR THE ENTIRE CONTRACT. EMPHASIZES THIS WAS THE TOTAL EXTENDED AMOUNT STATED ON THE BID FORM AND THIS IS THE AMOUNT THE CORPORATION REQUESTS THEY BE PAID UNDER THE CONTRACT.

GENERALLY, A CONTRACT WILL NOT BE REFORMED WHEN A UNILATERAL ERROR IN THE BID PRICE IS ALLEGED AFTER THE CONTRACT HAS BEEN AWARDED BECAUSE ONCE A BID HAS BEEN ACCEPTED, A BINDING CONTRACT IS FORMED AND THE CONTRACTOR MUST BEAR THE CONSEQUENCES OF HIS OWN ERROR. SEE OGDEN & DOUGHERTY V U.S., 102 CT. CL. 249 (1944); SALIGMAN V U.S., 56 F. SUPP. 505 (1944). HOWEVER, IF THE CONTRACTING OFFICER HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR IN THE LOW BID, THE ACCEPTANCE OF THAT BID DOES NOT RESULT IN A BINDING CONTRACT. UNDER SUCH CIRCUMSTANCES, A VALID LEGAL BASIS FOR REFORMATION OF THE CONTRACT EXISTS. SEE B-160433, DECEMBER 1, 1966; B-160081, OCTOBER 10, 1966; B 160167, OCTOBER 6, 1966; B-158675, MARCH 30, 1966.

YOUR DEPARTMENT'S SUBMISSION TO THIS OFFICE POINTS OUT THAT, WHILE MR. GUELICH WAS ADVISED ON TWO OCCASIONS THAT THE TOTAL PRICE OF THE CONTRACT, BASED ON THE UNIT PRICE OF $8,237.00, WOULD BE $65,896.00, THE POSSIBILITY OF ERROR WAS NOT MENTIONED AND HE WAS NEVER REQUESTED TO VERIFY THE CORPORATION'S BID PRICE. THE DEPARTMENT FEELS RELIEF SHOULD BE GRANTED SINCE IN ADDITION TO THE DIFFERENCE BETWEEN THE UNIT AND EXTENDED PRICES, THERE WERE OTHER FACTORS WHICH SHOULD HAVE RAISED A QUESTION OF ERROR IN THE CONTRACTING OFFICER'S MIND, I.E., FLEXI PANEL CORPORATION'S OFFER WAS $86,104.00 LESS THAN THE ONLY OTHER BID RECEIVED AND WAS IN LINE WITH THE $7,337.00 PER UNIT PAID FLEXI-PANEL FOR FIVE OF THESE UNITS THE PREVIOUS YEAR, WHICH UNITS LIKE ITEM 1A, ONLY REQUIRED DELIVERY F.O.B. HILLTOP, ARIZONA.

IN OUR OPINION, THE DISCREPANCY BETWEEN THE UNIT PRICE AND THE EXTENDED PRICE, COMBINED WITH THE SUBSTANTIALLY HIGHER PRICE OF THE ONLY OTHER BIDDER AND FLEXI-PANEL'S PRICE FOR THESE PREFABRICATED HOUSES LAST YEAR, SHOULD HAVE INDICATED TO THE CONTRACTING OFFICER THE PROBABILITY THAT THE UNIT PRICE DID NOT ACTUALLY REPRESENT THE INTENDED PRICE, SO THAT THE BID SHOULD NOT HAVE BEEN ACCEPTED WITHOUT FIRST REQUESTING VERIFICATION THEREOF. SEE 37 COMP. GEN. 829 (1958).

ON THE BASIS OF THE FACTS AND EVIDENCE OF RECORD ENUMERATED ABOVE, THERE IS LITTLE ROOM FOR DOUBT THAT FLEXI-PANEL MADE A BONA FIDE ERROR IN ITS BID, AS ALLEGED. ACCORDINGLY, SINCE FLEXI-PANEL HAS ESTABLISHED ITS INTENDED BID PRICE, CONTRACT NO. H50C14207014 MAY BE AMENDED TO PROVIDE FOR A TOTAL PRICE OF $73,896.00, AND PAYMENT IS AUTHORIZED TO BE MADE ON THAT BASIS. THE BID WHEN CORRECTED WILL STILL BE LOWER THAN THE ONLY OTHER BID RECEIVED ON THE SOLICITATION.

A REFERENCE TO THIS DECISION SHOULD BE MADE ON THE AMENDMENT TO THE CONTRACT.

THE FILE FORWARDED WITH THE LETTER OF JULY 29 IS RETURNED.