B-170691, JAN 28, 1971

B-170691: Jan 28, 1971

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A BID VERIFICATION BY PROTESTANT PRIOR TO AWARD OF CONTRACT DOES NOT RESULT IN A BINDING CONTRACT WHERE THE DIFFERENCE BETWEEN THE LOW BID AND SECOND LOW BID WAS 28.2 PER CENT AND BETWEEN THE LOW AND THIRD LOW BID 150.3 PER CENT AND THE CONTRACTING OFFICER DID NOT ADVISE PROTESTANT OF THE SUSPECTED MISTAKE. KUNZIG: REFERENCE IS MADE TO A LETTER DATED AUGUST 25. BIDS WERE OPENED ON FEBRUARY 12. THIS ENTRY WAS NOT CONSIDERED A QUALIFICATION OF THE BID BECAUSE OF THE FOLLOWING CLAUSE IN GSA FORM 1424. WHERE DETAILED SPECIFICATIONS ARE SHOWN OR REFERRED TO IN THE INVITATION FOR BIDS. INSERTION OF BRAND NAMES AND NUMBERS BY THE BIDDER WILL. THE THREE BIDS FOR ITEM 62 WERE AS FOLLOWS: BIDDER PRICE PER ROLL INDUSTRIAL $ 97.50 NATIONAL DISTRIBUTING CO. 125.00 H.

B-170691, JAN 28, 1971

CONTRACTS - MISTAKE IN BID - RESCISSION DECISION ALLOWING RECISSION OF CONTRACT BETWEEN INDUSTRIAL INSULATORS, INC., AND THE GENERAL SERVICES ADMINISTRATION FOR INSULATION MATERIAL BASED ON A MISTAKE IN BID. A BID VERIFICATION BY PROTESTANT PRIOR TO AWARD OF CONTRACT DOES NOT RESULT IN A BINDING CONTRACT WHERE THE DIFFERENCE BETWEEN THE LOW BID AND SECOND LOW BID WAS 28.2 PER CENT AND BETWEEN THE LOW AND THIRD LOW BID 150.3 PER CENT AND THE CONTRACTING OFFICER DID NOT ADVISE PROTESTANT OF THE SUSPECTED MISTAKE, NOR DID HE CHECK THE PRICES PREVIOUSLY PAID FOR PURCHASES OF THE SAME ITEM THEREFORE, CONCURRING WITH THE RECOMMENDATION OF THE CONTRACTING OFFICER, THE CONTRACT MAY BE RESCINDED.

TO MR. KUNZIG:

REFERENCE IS MADE TO A LETTER DATED AUGUST 25, 1970, FROM YOUR GENERAL COUNSEL, SUBMITTING FOR OUR CONSIDERATION A REQUEST FOR RESCISSION OF CONTRACT NO. GS-07S-13663 AWARDED INDUSTRIAL INSULATORS, INC. (INDUSTRIAL), UNDER SOLICITATION NO. F/33511-TE, BASED ON A MISTAKE IN ITS BID PRICE FOR ITEM 62 ALLEGED BY THE CORPORATION AFTER AWARD.

SOLICITATION NO. F/33511-TE, ISSUED ON JANUARY 15, 1969, COVERED INDEFINITE QUANTITY REQUIREMENTS FOR 86 ITEMS OF FSC CLASS 5640 INSULATION MATERIAL FOR THE PERIOD FROM DATE OF AWARD THROUGH FEBRUARY 28, 1970. BIDS WERE OPENED ON FEBRUARY 12, 1969. ONLY THREE OF THE 13 BIDS RECEIVED OFFERED TO FURNISH ITEM 62, FSN 5640-281-8628, INSULATION BATT, THERMAL, COMPLYING WITH MILITARY SPECIFICATION MIL-I-16411D DATED JUNE 10, 1968, TYPE I; ESTIMATED QUANTITY THREE ROLLS PER MONTH. INDUSTRIAL HAD ENTERED THE WORDS "TEMP MAT" UNDER ITEM 62. THIS ENTRY WAS NOT CONSIDERED A QUALIFICATION OF THE BID BECAUSE OF THE FOLLOWING CLAUSE IN GSA FORM 1424, SUPPLEMENTAL PROVISIONS, SEPTEMBER 1964 EDITION, INCORPORATED IN THE SOLICITATION BY REFERENCE:

"25. BIDDER - SPECIFIED BRAND NAMES. WHERE DETAILED SPECIFICATIONS ARE SHOWN OR REFERRED TO IN THE INVITATION FOR BIDS, INSERTION OF BRAND NAMES AND NUMBERS BY THE BIDDER WILL, UNLESS OTHERWISE STATED BY THE BIDDER, BE UNDERSTOOD TO MEAN THAT THE ARTICLES SO OFFERED FULLY COMPLY WITH THE SPECIFICATION REQUIREMENTS." THE THREE BIDS FOR ITEM 62 WERE AS FOLLOWS:

BIDDER PRICE PER ROLL

INDUSTRIAL $ 97.50

NATIONAL DISTRIBUTING CO. 125.00

H. K. PORTER CO., INC. 253.75 ACCORDING TO THE RECORD THE CONTRACTING OFFICER NOTED THE 28.2 PERCENT DIFFERENCE BETWEEN THE LOW AND SECOND LOW BIDS, AND THE 150.3 PERCENT DIFFERENCE BETWEEN THE LOW AND THE THIRD LOW BIDS. ACCORDINGLY, INDUSTRIAL WAS REQUESTED TO VERIFY ITS BID PRICE FOR ITEM 62 AND DID SO BY TELEGRAM OF JUNE 10, 1969. HOWEVER, THERE IS NO EVIDENCE OF RECORD THAT INDUSTRIAL WAS ADVISED, PURSUANT TO SECTION 1- 2.406-3 OF THE FEDERAL PROCUREMENT REGULATIONS OF A SUSPECTED MISTAKE. JUNE 17, 1969, SEVENTEEN ITEMS, INCLUDING ITEM 62, WERE AWARDED TO INDUSTRIAL. HOWEVER, ON JUNE 25, 1969, A REPRESENTATIVE OF INDUSTRIAL ADVISED THE CONTRACTING OFFICER BY TELEPHONE THAT INDUSTRIAL HAD MADE A MISTAKE IN ITS BID FOR ITEM 62. THIS ADVICE WAS CONFIRMED BY LETTER DATED AUGUST 8, 1969. IT WAS EXPLAINED THAT TEMP-MAT, THE PRODUCT ON WHICH INDUSTRIAL HAD BASED ITS BID, DID NOT MEET THE SPECIFICATION FOR TYPE I MATERIAL.

DURING THE CONTRACT PERIOD WHICH EXPIRED ON FEBRUARY 28, 1970, ORDERS WERE PLACED FOR 158 ROLLS OF THE INSULATION MATERIAL ALTHOUGH THE TOTAL ESTIMATED QUANTITY FOR THE CONTRACT WAS THREE ROLLS PER MONTH. INDUSTRIAL MADE NO DELIVERIES AND ON APRIL 7, 1970, ALL ORDERS FOR ITEM 62 WERE TERMINATED FOR DEFAULT. THE 158 ROLLS WERE PROCURED BY NEGOTIATION UNDER SOLICITATION 7PR-W-16171/A2. THE LOW OFFER UNDER SOLICITATION 7PR-W- 16171/A2 WAS $253.75 SUBMITTED BY H. K. PORTER CO., INC. (PORTER). THIS WAS THE SAME AMOUNT BID BY PORTER UNDER SOLICITATION NO. F33511-TE. THE SECOND LOW BIDDER UNDER SOLICITATION NO. F33511-TE, NATIONAL DISTRIBUTING CO., SUBMITTED AN OFFER OF $306.25 ON THE REPROCUREMENT.

IT WAS NOT UNTIL MAY 7, 1970, AFTER SEVERAL EXCHANGES OF CORRESPONDENCE BETWEEN INDUSTRIAL AND CONTRACTING PERSONNEL, THAT INDUSTRIAL WAS REQUESTED TO FURNISH EVIDENCE THAT TEMP-MAT, THE PRODUCT OFFERED FOR ITEM 62, DID NOT MEET SPECIFICATION REQUIREMENTS. INDUSTRIAL STATED IN ITS LETTER OF MAY 8, 1970, THAT TEMP-MAT COMPLIES WITH TYPE II OF MILITARY SPECIFICATION MIL-I-16411D RATHER THAN TYPE I REQUIRED FOR ITEM 62 OF THE SOLICITATION. THIS STATEMENT IS SUPPORTED BY A COPY OF THE MANUFACTURER'S SPECIFICATION DATA SHEET FOR TEMP-MAT.

OUR OFFICE WILL GRANT APPROPRIATE RELIEF, SUCH AS RESCISSION WITHOUT LIABILITY TO A CONTRACTOR, WHERE A MISTAKE HAS BEEN ALLEGED SUBSEQUENT TO THE AWARD OF A CONTRACT, IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF ERROR PRIOR TO AWARD. 168895, FEBRUARY 12, 1970; B-168890, FEBRUARY 24, 1970. ADDITIONALLY, IT MUST BE POINTED OUT THAT, GENERALLY, AWARD OF A CONTRACT FOLLOWING VERIFICATION OF A BID UPON REQUEST OF THE CONTRACTING OFFICER RESULTS IN A BINDING CONTRACT. 18 COMP. GEN. 942, 947 (1939); 27 ID 17 (1947). HOWEVER, WHERE THE BIDDER HAS NOT BEEN PLACED ON NOTICE OF THE NATURE AND EXTENT OF THE MISTAKE WHICH IS SUSPECTED, OUR OFFICE HAS RECOGNIZED AND FOLLOWED THE RULING IN UNITED STATES V METRO NOVELTY MANUFACTURING CO., 125 F SUPP. 713 (1954), THAT REAFFIRMATION OF A BID, WHERE THE PLAINTIFF WAS NOT PLACED ON NOTICE OF THE MISTAKE WHICH THE GOVERNMENT SURMISED, DID NOT BAR THE DEFENSE OF RESCISSION. 44 COMP. GEN. 383 (1965); B-167195, JUNE 23, 1969; B 167954 OCTOBER 14, 1969.

SUBSEQUENT TO AN INQUIRY BY THIS OFFICE AS TO THE NATURE OF THE REQUEST MADE OF INDUSTRIAL FOR A VERIFICATION OF ITS BID, WE WERE ADVISED THAT NEITHER INDUSTRIAL NOR THE PROCURING ACTIVITY HAD ANY RECORD OR INFORMATION CONCERNING THE QUESTION OF WHETHER INDUSTRIAL WAS ADVISED AS TO WHY VERIFICATION WAS SOUGHT OR THAT A SPECIFIC MISTAKE WAS SUSPECTED. HOWEVER, DUE TO THE DISPARITY IN THE BID PRICES, IT DOES NOT APPEAR THAT THE VERIFICATION WAS SUFFICIENT TO DISPEL ANY DOUBTS THAT THE CONTRACTING OFFICER MAY HAVE HAD CONCERNING THE PRICE BID FOR ITEM 62. SEE B-160381, DECEMBER 2, 1966. THEREFORE, IT WAS INCUMBENT UPON THE CONTRACTING OFFICER TO SEEK ADDITIONAL CLARIFICATION, OR AT THE VERY LEAST TO CHECK ON THE PRICES PAID FOR PREVIOUS PURCHASES OF THE SAME ITEM, SINCE THE CONTRACTING OFFICER POINTS OUT THAT RECORDS WERE AVAILABLE (WHICH APPARENTLY HE DID NOT CONSULT) INDICATING THAT THE LOWEST PREVIOUS PURCHASE PRICE FOR ITEM 62 WAS $268.79 PER ROLL, WHICH IS 176 PERCENT HIGHER THAN THE LOW BID AND 115 PERCENT HIGHER THAN THE SECOND LOW BID.

IN ANY EVENT, IT WAS DETERMINED BY THE CONTRACTING OFFICER THAT INDUSTRIAL HAD SUBMITTED CLEAR AND CONVINCING EVIDENCE THAT A MISTAKE WAS MADE IN THAT THE BID PRICE WAS BASED ON A PRODUCT WHICH DID NOT MEET THE SPECIFICATIONS. HE FURTHER DETERMINED THAT HE SHOULD HAVE BEEN ON NOTICE THAT INDUSTRIAL'S BID OF $97.50 PER ROLL AND THE SECOND LOW BID OF $125.00 PER ROLL WERE UNCONSCIONABLY LOW. MOREOVER, WE ARE OF THE VIEW THAT THE 28.2 PERCENT DIFFERENCE BETWEEN THE LOW AND SECOND LOW BIDS SHOULD, IN AND OF ITSELF, HAVE BEEN SUFFICIENT TO HAVE PUT THE CONTRACTING OFFICER ON NOTICE OF THE POSSIBILITY OF AN ERROR IN THE BID. THE CONTRACTING OFFICER CONCLUDED, THEREFORE, THAT THE AWARD SHOULD NOT HAVE BEEN MADE TO INDUSTRIAL NOTWITHSTANDING THE FACT THAT INDUSTRIAL VERIFIED ITS BID, SINCE THE ONLY REASONABLY PRICED BID UNDER SOLICITATION F/33511-TE WAS THE THIRD LOW BID FROM PORTER AT $253.75. ON THE BASIS OF THIS DETERMINATION, THE CONTRACTING OFFICER RECOMMENDED THAT CONTRACT GS-07S-13663 WITH INDUSTRIAL BE RESCINDED AND THAT INDUSTRIAL NOT BE HELD LIABLE FOR THE EXCESS COSTS IN THE AMOUNT OF $24,687.50.

IN VIEW OF THE QUESTIONABLE VERIFICATION IN THE PRESENT CASE, THE DISPARITY BETWEEN THE LOW BID AND THE SECOND LOW BID, AND THE DISPARITY BETWEEN THE LOW BID AND THE LOWEST AWARDED CONTRACT PRICE OF PREVIOUS PURCHASES OF THE SAME ITEM, IT WOULD BE UNCONSCIONABLE FOR THE GOVERNMENT TO INSIST THAT INDUSTRIAL SHOULD HAVE SUPPLIED ITEM 62 AT SUCH A LOW PRICE. THE CONTRACT FOR ITEM 62 MAY THEREFORE BE RESCINDED WITHOUT LIABILITY TO INDUSTRIAL, AS ADMINISTRATIVELY RECOMMENDED.

THE FILE TRANSMITTED WITH THE LETTER FROM YOUR GENERAL COUNSEL IS RETURNED.