B-171229, FEB 17, 1971

B-171229: Feb 17, 1971

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

MAY HAVE THE PRICE FOR THREE VARIDRIVE MOTORS CORRECTED TO READ $601.11 AS A LOT PRICE RATHER THAN A UNIT PRICE. WHERE SUCCESSFUL BID WAS MORE THAN FOUR TIMES THE AMOUNT OF THE NEXT HIGHEST BID PRICE AND SEVEN TIMES THE CURRENT MARKET APPRAISAL. SUCH INFORMATION WAS AVAILABLE TO THE CONTRACTING OFFICER. GAO CONCLUDES THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND IN THE ABSENCE OF BID VERIFICATION THE PRICE MAY BE CORRECTED. TO GENERAL HEDLUND: REFERENCE IS MADE TO LETTER DATED NOVEMBER 3. TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 37-0184-084 IS BASED. THE BID OF THE COMPANY WAS ACCEPTED AS TO ITEM 64 ($1. WAS $80 EACH. THE CONTRACTING OFFICER STATES THAT THE MOTORS COVERED BY ITEM 64 WERE ORIGINALLY IN A SCRAP PILE AND THAT THEY WERE LATER UPGRADED TO USABLE PROPERTY.

B-171229, FEB 17, 1971

SURPLUS PROPERTY SALE - MISTAKE IN BID DECISION HOLDING THAT WEAVER ELECTRIC CO., MAY HAVE THE PRICE FOR THREE VARIDRIVE MOTORS CORRECTED TO READ $601.11 AS A LOT PRICE RATHER THAN A UNIT PRICE. A CONTRACT FOR SURPLUS GOODS AWARDED WITHOUT BID VERIFICATION, WHERE SUCCESSFUL BID WAS MORE THAN FOUR TIMES THE AMOUNT OF THE NEXT HIGHEST BID PRICE AND SEVEN TIMES THE CURRENT MARKET APPRAISAL, AND SUCH INFORMATION WAS AVAILABLE TO THE CONTRACTING OFFICER, GAO CONCLUDES THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND IN THE ABSENCE OF BID VERIFICATION THE PRICE MAY BE CORRECTED.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 3, 1970, FILE REFERENCE DSAH- G, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, HEADQUARTERS, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY THE WEAVER ELECTRIC CO. TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 37-0184-084 IS BASED.

THE DEFENSE SURPLUS SALES OFFICE (DSSO), FORT WORTH, TEXAS, BY INVITATION NO. 37-0184, REQUESTED BIDS FOR THE PURCHASE OF VARIOUS ITEMS OF SURPLUS PROPERTY, INCLUDING ITEM 64 DESCRIBED AS THREE VARIDRIVE MOTORS IN POOR CONDITION, "REPAIR REQUIRED." IN RESPONSE, THE WEAVER ELECTRIC CO. SUBMITTED A BID DATED JUNE 13, 1970, OFFERING TO PURCHASE THE THREE MOTORS UNDER ITEM 64 AT A PRICE OF $601.11 EACH. THE BID OF THE COMPANY WAS ACCEPTED AS TO ITEM 64 ($1,803.33) AND OTHER ITEMS ($422.22) ON JUNE 30, 1970.

IN A LETTER DATED JULY 4, 1970, WEAVER ADVISED THE CONTRACTING OFFICER THAT IT HAD MADE AN ERROR IN ITS BID IN THAT IT HAD INTENDED THE PRICE OF $601.11 ON ITEM 64 AS A LOT PRICE RATHER THAN A UNIT PRICE FOR THE THREE MOTORS COVERED BY THAT ITEM. THE COMPANY REQUESTED THAT ITEM 64 OF THE CONTRACT BE CANCELED WITHOUT LIABILITY TO THE COMPANY OR THAT ITS BID PRICE OF $601.11 BE CONSIDERED AS A LOT PRICE FOR ITEM 64, OR $200.37 PER MOTOR.

THE ABSTRACT OF BIDS SHOWS THAT THE SIX OTHER BIDS ON ITEM 64 RANGED FROM $131 TO $15.10. THE CURRENT MARKET APPRAISAL VALUE, KNOWN TO THE CONTRACTING OFFICER PRIOR TO BID OPENING, WAS $80 EACH. IN HIS SUPPLEMENTAL REPORT, IN WHICH HE RECOMMENDED THAT THE BID OF WEAVER BE CORRECTED TO SHOW A UNIT PRICE OF $200.37 FOR ITEM 64, THE CONTRACTING OFFICER STATES THAT THE MOTORS COVERED BY ITEM 64 WERE ORIGINALLY IN A SCRAP PILE AND THAT THEY WERE LATER UPGRADED TO USABLE PROPERTY; THAT THE ACQUISITION COST OF THE MOTORS WAS ORIGINALLY ESTIMATED AS $100 AND LATER RAISED TO $1,000 BY THE DSSO PROPERTY SALES SPECIALIST BASED ON HIS ESTIMATE OF THE ACQUISITION COST OF SIMILAR PROPERTY; AND THAT AT THE SAME TIME THAT HE ESTIMATED THE ACQUISITION COST OF THE MOTORS, THE DSSO PROPERTY SALES SPECIALIST ESTABLISHED A CURRENT MARKET APPRAISAL OF $80 EACH FOR THE MOTORS. THE CONTRACTING OFFICER ALSO STATED THAT AT THE TIME HE EVALUATED THE BID OF WEAVER HE OVERLOOKED THE FOREGOING INFORMATION AND THAT HE HAS CONCLUDED THAT HE SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF A MISTAKE IN THE BID OF WEAVER PRIOR TO MAKING AN AWARD.

NORMALLY, A WIDE RANGE OF BID PRICES IN RESPONSE TO A SURPLUS SALE IS NOT SUFFICIENT TO PLACE A CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR BECAUSE THE PRICES OFFERED DEPEND TO A GREAT EXTENT UPON THE USES TO WHICH THE PROPERTY WILL BE PUT, OR UPON THE RISK OF RESALE WHICH THE BIDDER MAY BE WILLING TO TAKE. SEE B-151079, MARCH 28, 1963. ALSO, SEE UNITED STATES V SABIN METAL CORPORATION, 151 F. SUPP. 683 (1957); AFFIRMED 253 F. 2D 956 (1958); AND WENDER PRESSES, INC. V UNITED STATES, 343 F. 2D 961 (1965). HOWEVER, IN THIS CASE, THE BID PRICE OF WEAVER ON ITEM 64 WAS MORE THAN FOUR TIMES THE AMOUNT OF THE NEXT HIGHEST BID PRICE ON THAT ITEM AND SEVEN TIMES THE CURRENT MARKET APPRAISAL OF $80.

ACCORDINGLY, IT MAY BE CONCLUDED THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND THE BID SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. WE THEREFORE CONCUR IN THE RECOMMENDATION THAT THE PRICE OF ITEM 64 SHOULD BE CORRECTED TO READ $200.37 EACH, OR A TOTAL PRICE OF $601.11 FOR THAT ITEM.