B-172355, JUN 15, 1971

B-172355, JUN 15, 1971

CONTRACTS - MISTAKE IN BID - BINDING CONTRACT IN CONNECTION WITH A CONTRACT ENTERED INTO BETWEEN INTERSPACE ENGINEERING & SUPPORT AND THE DEFENSE INDUSTRIAL SUPPLY CENTER, PHILADELPHIA, PA., FOR A QUANTITY OF WASHERS, SINCE INTERSPACE'S UNIT PRICE OF $0.09 WAS SUBSTANTIALLY BELOW THE GOVERNMENT ESTIMATE OF $0.17 THE BID SHOULD HAVE BEEN VERIFIED BEFORE ACCEPTANCE AND THEREFORE WITHOUT SUCH VERIFICATION, THE CONTRACT IS NOT BINDING. INTERSPACE SHOULD BE OFFERED THE OPTION OF REFUNDING THE OVERPAYMENT MADE ON THE WASHERS ALREADY FURNISHED OR TAKING BACK THE WASHERS THAT ARE AVAILABLE AND REFUNDING THE AMOUNT PAID FOR THAT QUANTITY AND THE AMOUNT OF OVERPAYMENT ON THE WASHERS THAT HAVE BEEN USED.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO LETTER DSAH-G DATED MARCH 23, 1971, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, HEADQUARTERS, DEFENSE SUPPLY AGENCY, REQUESTING A DECISION AS TO THE RELIEF THAT MAY BE GRANTED TO INTERSPACE ENGINEERING & SUPPORT UNDER CONTRACT NO. DSA500-71-C-0008.

IN RESPONSE TO INVITATION NO. DSA500-71-B-4343, ISSUED ON APRIL 29, 1970, BY THE DEFENSE INDUSTRIAL SUPPLY CENTER, PHILADELPHIA, PENNSYLVANIA, INTERSPACE ENGINEERING & SUPPORT SUBMITTED A BID AS FOLLOWS:

(CHART OMITTED)

THE EIGHT OTHER BIDDERS QUOTED UNIT PRICES RANGING FROM $0.121 TO $0.26. ON JULY 8, 1970, CONTRACT NO. DSA500-71-C-0008 WAS AWARDED TO INTERSPACE.

ON JULY 22, 1970, INTERSPACE MADE A SHIPMENT OF AN AGGREGATE QUANTITY OF 27,500 WASHERS AS FOLLOWS:

ITEM QUANTITY CONSIGNEE

1 10,000 EA. (100 HD) DCSC,COLUMBUS, OHIO

2 7,500. (75 HD) NSC, NORFOLK, VIRGINIA

3 10,000 EA. (100 HD) DEFENSE DEPOT, OGDEN, UTAH

UPON RECEIPT OF NOTIFICATION FROM THE CONSIGNEES OF THE QUANTITIES RECEIVED (AND THE FACT THAT EACH PACKAGE OF 100 WASHERS WAS LABELED "EACH" IN LIEU OF 1-HD), INTERSPACE WAS ADVISED THAT THERE REMAINED DUE UNDER THE CONTRACT AMOUNTS AS FOLLOWS: DCSC, COLUMBUS, 9,900 HD; NSC, NORFOLK, 7,425 HD; AND DD OGDEN, 9,900 HD.

BY LETTER OF OCTOBER 1, 1970, THE GENERAL MANAGER OF INTERSPACE ADVISED THE PROCURING ACTIVITY THAT THERE APPEARED TO BE A MUTUAL MISTAKE CONCERNING THE QUANTITY OF WASHERS TO BE SUPPLIED UNDER THE CONTRACT, AND THAT HE, GOVERNMENT REPRESENTATIVES, PACKAGING CONCERNS, AND INTERSPACE PERSONNEL HAD ALL INNOCENTLY INTERPRETED THE SYMBOL "HD" AS THE UNIT OF PACKAGE RATHER THAN AS THE UNIT OF QUANTITY. THE GENERAL MANAGER FURTHER STATED THAT THE SYMBOL "HD" IS COMMONLY USED IN PACKAGING INSTRUCTIONS; AND THAT WHEN ASKED BY THE GOVERNMENT BUYER TO CONFIRM ITS QUOTATION, INTERSPACE SENT A LETTER DATED JUNE 6, 1970, CONFIRMING ITS QUOTE FOR "27,550 (27,500) EACH." THE LETTER WENT ON TO STATE THAT THE GOVERNMENT QUALITY INSPECTOR INTERPRETED THE CONTRACT AS CALLING FOR A TOTAL QUANTITY OF 27,550 (27,500) AND THAT WHEN THIS QUANTITY WAS DELIVERED BY INTERSPACE, THE CONTRACT WAS TO BE COMPLETE. IT ALSO IS STATED BY INTERSPACE THAT THREE PACKAGING CONCERNS AND THE DISBURSING OFFICER CONSIDERED THE CONTRACT AS COMPLETE AFTER DELIVERY OF THE 27,500 LOCK WASHERS. IN THIS CONNECTION, THE RECORD INDICATES THAT FOR THE 27,500 LOCK WASHERS DELIVERED BY IT, INTERSPACE RECEIVED A PAYMENT OF $2,462.62 ($2.475 LESS 1/2-PERCENT PROMPT PAYMENT DISCOUNT OF $12.38). FURTHER, WHILE INTERSPACE ALLEGES THAT THE PREAWARD SURVEY WAS BASED ON THE MANUFACTURE OF ONLY 27,550 (27,500) LOCK WASHERS, THE PREAWARD SURVEY REPORT INDICATES THAT IT COVERED THE MANUFACTURE OF "27,500 HD" LOCK WASHERS.

IT IS THE RECOMMENDATION OF THE CONTRACTING OFFICER THAT RELIEF BE GRANTED TO INTERSPACE BASED ON ONE OF THE FOLLOWING ALTERNATIVES:

"19. IT IS THE RECOMMENDATION OF THE CONTRACTING OFFICER THAT RELIEF BE GRANTED TO INTERSPACE ON THE FOLLOWING ALTERNATIVES:

"A. CONSIDER THE CONTRACT COMPLETE WITH THE DELIVERY OF 27,500 EACH WITH PAYMENT TO THE CONTRACTOR AT A UNIT PRICE OF $0.00375 (BASED ON A QUOTATION RECEIVED FROM ANOTHER SUPPLIER FOR 27,500 WASHERS IN DECEMBER 1970) EACH, TOTAL $103.13, WITH A REFUND TO THE GOVERNMENT OF $2347.11, ARRIVED AT AS FOLLOWS:

$103.13 $2,462.62 AMOUNT PAID

12.38 REFUND OF DISCOUNT - 115.51

$115.51 $2,347.11

"B. CANCELLATION OF THE BALANCE DUE UNDER THE CONTRACT, AT NO COST, AND PAYMENT BE MADE FOR THE QUANTITY DELIVERED AT THE SECOND LOW BID PRICE RECEIVED, WITH REFUND OF THE OVERPAYMENT; OR

"C. RETURN OF THE QUANTITY AVAILABLE FOR RETURN WITH PAYMENT TO THE CONTRACTOR FOR THE AMOUNT NOT AVAILABLE FOR RETURN AT THE SECOND LOW BID PRICE RECEIVED OR AT A UNIT PRICE OF $0.00375 (BASED ON A QUOTATION RECEIVED FROM ANOTHER SUPPLIER FOR 27,500 WASHERS IN DECEMBER 1970) EACH WITH REFUND BY THE CONTRACTOR OF THE OVERPAYMENT."

THE CONTRACTING OFFICER RECOMMENDS RELIEF BECAUSE OF THE DISPARITY IN PRICE BETWEEN INTERSPACE'S LOW BID AND THE NEXT LOWER BIDS; THE FACT THAT IDENTICAL WASHERS HAD PREVIOUSLY BEEN PURCHASED AT $0.15 PER HD; AND BECAUSE OF THE GOVERNMENT ESTIMATE OF $0.17 PER HD. ALTHOUGH INTERSPACE ALLEGES THAT BY LETTER DATED JUNE 6, 1970, IT CONFIRMED ITS UNIT PRICE OF $0.09, THE CONTRACTING OFFICER REPORTS THAT AN EXAMINATION OF THE CONTRACT FILES FAILS TO DISCLOSE A MEMORANDUM RELATING TO A REQUEST TO INTERSPACE FOR CONFIRMATION OR THE REFERRED-TO LETTER.

BOTH THE CONTRACTING OFFICER AND THE ASSISTANT COUNSEL AGREE THAT INTERSPACE SHOULD HAVE BEEN REQUESTED TO CONFIRM ITS BID PRICE PRIOR TO AWARD. WE AGREE THAT THE BID SHOULD NOT HAVE BEEN ACCEPTED WITHOUT VERIFICATION.

SINCE THE BID SHOULD HAVE BEEN VERIFIED BEFORE ACCEPTANCE, WE ARE OF THE OPINION THAT THE ACCEPTANCE OF THE BID DID NOT RESULT IN A VALID AND BINDING CONTRACT. ACCORDINGLY, NO LEGAL BASIS EXISTS FOR REQUIRING INTERSPACE TO FURNISH THE UNDELIVERED BALANCE OF 2,722,500 (27,225 HD) LOCK WASHERS.

HOWEVER, DESPITE THE REPRESENTATIONS MADE BY INTERSPACE THAT THE CONTRACT WAS FOR 27,500 WASHERS, IT APPEARS TO US THAT THE CONTRACT SPECIFICALLY REQUIRED THE DELIVERY OF 2,750,000 WASHERS. IN THAT REGARD, ALTHOUGH THE INVITATION SCHEDULE STATES THE QUANTITY AS 27,500, THE UNIT IS EXPRESSED AS "HD" WHICH IS DEFINED IN THE NOTE IN THE SCHEDULE AS 100. THUS, THE QUANTITY BEING PURCHASED WAS 27,500 UNITS OF A HUNDRED OR 2,750,000 WASHERS. WHILE THE NOTE IN THE SCHEDULE STATES THAT "HD EQUALS 100" AND THAT "BIDDERS ARE CAUTIONED TO SUBMIT OFFERS ON THE BASIS OF THIS UNIT OF ISSUE," THE UNIT OF PURCHASE WAS EXPRESSED IN THE SCHEDULE IN HUNDREDS. THE INVITATION SCHEDULE ALSO REFERS TO DISC FORM 644, APRIL 1969, WHICH CONTAINS A SAMPLE SCHEDULE SHEET SHOWING THAT THE "UNIT" COLUMN IS THE "UNIT OF PURCHASE." FURTHER, THE AWARD DOCUMENT AND THE DELIVERY SCHEDULE THEREIN SPECIFY "27,500 HD." SINCE THE "UNIT PRICE" WAS $.09 AND THE "UNIT" WAS 100, INTERSPACE SHOULD HAVE BEEN PAID ON THE BASIS OF $.09 PER HUNDRED. THE NEXT LOW BID PRICE, WHICH HAS SINCE BEEN VERIFIED, WAS $0.121 PER HUNDRED. THEREFORE, THE ADJUSTMENT OF THE PRICE FOR THE WASHERS DELIVERED BY INTERSPACE IS LIMITED TO AN AMOUNT NOT TO EXCEED THE NEXT LOW BID. 21 COMP. GEN. 362 (1941); 36 ID. 585 (1957).

IT THEREFORE FOLLOWS THAT AN OVERPAYMENT HAS BEEN MADE TO INTERSPACE. 35 COMP. GEN. 63, 70 (1955), IT WAS STATED:

"IT IS WELL ESTABLISHED THAT THE GOVERNMENT, INDEPENDENTLY OF STATUTE, MAY RECOVER FUNDS WHICH ITS AGENTS HAVE WRONGFULLY, ERRONEOUSLY, OR ILLEGALLY PAID. THIS RIGHT EXISTS WHETHER SUCH PAYMENTS WERE MADE UNDER MISTAKE OF LAW OR FACT; WHETHER BECAUSE IN EXCESS OF AUTHORITY OR BASED UPON AN ERRONEOUS INTERPRETATION OF A CONTRACT LATER FOUND TO BE INCORRECT, OR BECAUSE OF THE RELIANCE UPON FACTS FOUND SUBSEQUENTLY NOT TO EXIST. *** "

SEE, ALSO, 41 COMP. GEN. 514 (1962).

SINCE A VALID CONTRACT IS NOT IN EXISTENCE BETWEEN INTERSPACE AND THE GOVERNMENT, INTERSPACE SHOULD BE OFFERED THE OPTION OF (1) REFUNDING THE OVERPAYMENT MADE ON THE 27,500 WASHERS FURNISHED OR (2) TAKING BACK THE WASHERS THAT ARE AVAILABLE FOR RETURN AND REFUNDING THE AMOUNT PAID FOR THAT QUANTITY AND THE AMOUNT OF OVERPAYMENT ON THE WASHERS THAT HAVE BEEN USED.