B-172986, AUG 30, 1971

B-172986, AUG 30, 1971

CONTRACTS - MISTAKE IN BID - DUTY OF GOVERNMENT TO GIVE FAIR NOTICE OF SUSPECTED MISTAKE DECISION THAT THE LOW BID OF REED AND WITTING COMPANY UNDER IFB ISSUED BY THE BUREAU OF MINES FOR A SUPPLY OF LAMINATED PLASTIC INSTRUCTION CARDS MAY BE AMENDED TO CHANGE THE PRICE FROM $1,560 TO $3,510. THE AWARD OF A CONTRACT AFTER A BID HAS BEEN VERIFIED PURSUANT TO A REQUEST OF A CONTRACTING OFFICER ORDINARILY RESULTS IN A VALID CONTRACT. HOWEVER, THE REQUEST MUST DO MORE THAN ASK CONFIRMATION OF THE BID PRICE; IT MUST INFORM BIDDER THAT A MISTAKE IS SUSPECTED AND THE GROUNDS FOR THE SUSPICION. AS SUSPECTED MISTAKE WAS NOT MADE KNOWN TO BIDDER, HE DID NOT RECEIVE FAIR NOTICE; THEREFORE, NO VALID CONTRACT WAS FORMED. BID MAY BE CHANGED AS VALID MISTAKE WAS DEMONSTRATED AND AWARD MADE AS BID WAS STILL LOW.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF MAY 14, 1971, FROM THE DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION, REQUESTING A DECISION REGARDING AN ERROR MADE BY REED AND WITTING COMPANY IN ITS BID UPON WHICH PURCHASE ORDER 312608 WAS AWARDED.

THE BUREAU OF MINES ISSUED INVITATION FOR BIDS NO. PGH. 67 ON JANUARY 11, 1971, FOR SUPPLYING 130,000 POCKET-SIZED LAMINATED PLASTIC CARDS WITH PRINTED INSTRUCTIONS AND ILLUSTRATIONS FOR THE USE OF A PORTABLE OXYGEN MASK. REED AND WITTING SUBMITTED A BID OF $1,560.00. THE REMAINING FOUR BIDS RANGED IN PRICE FROM $4,568.00 TO $26,000.00.

THE ADMINISTRATIVE REPORT STATES THAT THE WIDE VARIANCE IN PRICES CAN BE EXPLAINED IN PART BY THE FACT THAT THE BIDDERS WERE OFFERING A VARIETY OF GRADES OF LAMINATING FILM FOR THE CARDS. NEVERTHELESS, THE RECORD SHOWS THAT THE PURCHASING AGENT WAS ON NOTICE THAT THERE MAY HAVE BEEN A MISTAKE IN THE LOW BID. THEREFORE, THE PURCHASING AGENT REQUESTED THE PRESIDENT OF REED AND WITTING TO VERIFY BY TELEPHONE THAT THE BID WAS CORRECT. DETAILS WERE PROVIDED AS TO THE BASIS FOR SUSPECTING AN ERROR IN BID. THE PRESIDENT AFFIRMED THE BID PRICE AND PURCHASE ORDER 312608 WAS THEN AWARDED TO REED AND WITTING. THE AGENCY HAS REPORTED ORALLY THAT PERFORMANCE OF THE CONTRACT WAS COMPLETED APRIL 29, 1971.

SUBSEQUENT TO THE AWARD OF THE PURCHASE ORDER, THE PRESIDENT OF REED AND WITTING NOTIFIED THE PURCHASING AGENT BY TELEPHONE ON MARCH 5, 1971, AND BY LETTER OF MARCH 8, 1971, THAT THE BID WAS ERRONEOUS. HE ALLEGED THAT HE HAD UNDERESTIMATED BY TWO-THIRDS THE AMOUNT OF PLASTIC MATERIAL AND LAMINATING TIME NECESSARY TO COMPLETE THE CONTRACT AND THAT HIS BID SHOULD HAVE BEEN $3,500.00. THE PURCHASING AGENT REQUESTED REED AND WITTING TO SUBMIT WRITTEN STATEMENTS AND OTHER EVIDENCE IN SUPPORT OF ITS ALLEGATIONS. SUBSEQUENT LETTERS OF APRIL 6, 1971, AND APRIL 13, 1971, FROM REED AND WITTING REPEATED THAT THE ALLEGED MISTAKE WAS MADE IN CALCULATION OF THE AMOUNT OF PLASTIC NEEDED AND THE TIME REQUIRED FOR LAMINATION OF THE CARDS. REED AND WITTING ALSO SUBMITTED THE PRICE LIST AND WORKSHEET USED IN PREPARATION OF THE BID. THE CLAIMANT ASSERTS THAT IT SHOULD HAVE QUOTED $27.00 PER THOUSAND CARDS RATHER THAN $12.00 PER THOUSAND.

A BIDDER WHO MAKES A MISTAKE IN A BID WHICH HAS BEEN ACCEPTED IN GOOD FAITH BY THE GOVERNMENT MUST BEAR THE CONSEQUENCES OF HIS MISTAKE UNLESS THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER PRIOR TO AWARD HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE MISTAKE. HOWEVER, IF A PARTY TO A CONTRACT MAKES A MATERIAL MISTAKE AND THE OTHER PARTY HAS REASON TO KNOW OF THE MISTAKE, THE LATTER PARTY MAY NOT TAKE ADVANTAGE OF THE PARTY MAKING THE MISTAKE BUT THE LATTER MAY SEEK RESCISSION AND RESTITUTION. COMP. GEN. 672, 674-675 (1969).

THE EVIDENCE PRESENTED BY REED AND WITTING SUPPORTS THE CONCLUSION THAT THE BIDDER DID, IN FACT, SUBMIT A MISTAKEN BID. MOREOVER, THE BID, IF CORRECTED, WOULD REMAIN THE LOWEST BID RECEIVED UNDER THE INVITATION.

THE AWARD OF A CONTRACT AFTER A BID HAS BEEN VERIFIED PURSUANT TO THE REQUEST OF A CONTRACTING OFFICER ORDINARILY RESULTS IN A BINDING CONTRACT. HOWEVER, A CONTRACTING OFFICER CANNOT DISCHARGE HIS DUTY TO VERIFY MERELY BY REQUESTING CONFIRMATION OF THE BID PRICE; HE MUST INFORM THE BIDDER THAT HE SUSPECTS THAT A MISTAKE WAS MADE IN THE BID AND HE MUST EXPLAIN THE GROUNDS FOR HIS SUSPICION. 44 COMP. GEN. 383, 386 (1965); B- 166186, MARCH 26, 1969. SECTION 1-2.406-3(D)(1) OF THE FEDERAL PROCUREMENT REGULATIONS PROVIDES IN THIS RESPECT:

"WHENEVER THE CONTRACTING OFFICER SUSPECTS THAT A MISTAKE MAY HAVE BEEN MADE IN A BID, HE SHALL IMMEDIATELY REQUEST THE BIDDER TO VERIFY THE BID. SUCH REQUEST SHALL INFORM THE BIDDER WHY THE REQUEST FOR VERIFICATION IS MADE - THAT A MISTAKE IS SUSPECTED AND THE BASIS FOR SUCH SUSPICION; E.G., THAT THE BID IS SIGNIFICANTLY OUT OF LINE WITH THE NEXT LOW OR OTHER BIDS OR WITH THE GOVERNMENT'S ESTIMATE. ***"

IN THIS CASE, THE PURCHASING AGENT ASKED THE BIDDER BY TELEPHONE TO MAKE AN "ON-THE-SPOT" VERIFICATION OF ITS PRICE, BUT DID NOT EXPLAIN TO THE BIDDER THE NATURE AND EXTENT OF THE SUSPECTED MISTAKE. THE BIDDER DID NOT RECEIVE FAIR NOTICE OF THE MISTAKE WHICH THE PROCUREMENT AGENCY BELIEVED MIGHT HAVE OCCURRED. UNDER THESE CIRCUMSTANCES, THE GOVERNMENT CANNOT TAKE ADVANTAGE OF THE MISTAKE OF THE BIDDER. THEREFORE, THE PURCHASE ORDER SHOULD BE AMENDED TO INCREASE THE CONTRACT PRICE TO $3,510.00 ($27 PER THOUSAND X 130,000 $3,510).