B-173360, JUL 20, 1971

B-173360: Jul 20, 1971

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THE VARIANCE BETWEEN THE BID PRICE AND THE APPRAISED VALUE WAS SUCH THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR. SHOULD HAVE VERIFIED THE BID BEFORE ISSUING THE CONTRACT. TO GENERAL HEDLUND: REFERENCE IS MADE TO A LETTER DATED JUNE 18. REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY WESTERN NON-FERROUS METALS CORPORATION TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 46-1096-092 IS BASED. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEM 98 ON APRIL 26. IT IS REPORTED THAT ON MAY 11. WAS $0.12 PER POUND. IN HIS REPORT THE CONTRACTING OFFICER STATES THAT AN ERROR IN THE BID OF THE CORPORATION AS TO ITEM 98 WAS NOT SUSPECTED PRIOR TO AWARD BECAUSE IT WAS ASSUMED THAT THE COPPER CONTENT MAY HAVE BEEN HEAVY ON THIS PARTICULAR ITEM AND SINCE A SIMILAR ITEM.

B-173360, JUL 20, 1971

CONTRACT - CANCELLATION OF ALLOWING THE CANCELLATION OF A SALES CONTRACT LET BY DEFENSE SURPLUS SALES OFFICE TO WESTERN NON-FERROUS METALS CORPORATION. THE VARIANCE BETWEEN THE BID PRICE AND THE APPRAISED VALUE WAS SUCH THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR, AND SHOULD HAVE VERIFIED THE BID BEFORE ISSUING THE CONTRACT.

TO GENERAL HEDLUND:

REFERENCE IS MADE TO A LETTER DATED JUNE 18, 1971, FILE REFERENCE DSAH-G, WITH ENCLOSURES, FROM THE ASSOCIATE COUNSEL, HEADQUARTERS, CAMERON STATION, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY WESTERN NON-FERROUS METALS CORPORATION TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 46-1096-092 IS BASED.

THE DEFENSE SURPLUS SALES OFFICE, SAN DIEGO, CALIFORNIA, REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS, INCLUDING ITEM 98 DESCRIBED AS COPPER CABLE, INSULATED, SCRAP, RUBBER AND VINYL COVERED, 60,000 POUNDS. IN RESPONSE, WESTERN NON-FERROUS METALS CORPORATION SUBMITTED A BID DATED APRIL 16, 1971, OFFERING TO PURCHASE, AMONG OTHER ITEMS, THE SCRAP UNDER ITEM 98 AT A UNIT PRICE OF $0.18389 PER POUND. TELEGRAM DATED APRIL 19, 1971, WESTERN INCREASED ITS BID PRICE FOR ITEM 98 TO $0.21639 PER POUND. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEM 98 ON APRIL 26, 1971.

IT IS REPORTED THAT ON MAY 11, 1971, WESTERN'S REPRESENTATIVE APPEARED AT THE STORAGE AREA TO PICK UP THE SCRAP THE CORPORATION HAD PURCHASED; THAT WHEN THE REPRESENTATIVE STARTED LOADING THE SCRAP COVERED BY ITEM 96, THE GOVERNMENT REPRESENTATIVE ADVISED WESTERN'S REPRESENTATIVE THAT THE SALES RECORDS SHOWED THAT THE CORPORATION HAD PURCHASED THE SCRAP COVERED BY ITEM 98 AND NOT ITEM 96; AND THAT WESTERN'S REPRESENTATIVE THEN ALLEGED THAT THE CORPORATION HAD MADE AN ERROR IN ITS BID IN THAT IT HAD INTENDED BIDDING ON ITEM 96 INSTEAD OF ITEM 98. BY LETTER DATED MAY 21, 1971, WESTERN REQUESTED THAT THE SALES CONTRACT BE CANCELED WITHOUT LIABILITY TO THE CORPORATION.

THE ABSTRACT OF BIDS SHOWS THAT THE NINE OTHER BIDS ON ITEM 98 RANGED FROM $0.10111 TO $0.0025 PER POUND. THE CURRENT MARKET APPRAISAL VALUE, KNOWN TO THE CONTRACTING OFFICER PRIOR TO BID OPENING, WAS $0.12 PER POUND. IN HIS REPORT THE CONTRACTING OFFICER STATES THAT AN ERROR IN THE BID OF THE CORPORATION AS TO ITEM 98 WAS NOT SUSPECTED PRIOR TO AWARD BECAUSE IT WAS ASSUMED THAT THE COPPER CONTENT MAY HAVE BEEN HEAVY ON THIS PARTICULAR ITEM AND SINCE A SIMILAR ITEM, ITEM 52, UNDER THIS SALE SOLD FOR $0.18111 PER POUND. IN THAT CONNECTION, THE DEFENSE LOGISTICS SERVICES CENTER STATES THAT THE CENTER IS OF THE OPINION THAT THE CONTRACTING OFFICER SHOULD HAVE REQUESTED VERIFICATION OF THE CORPORATION'S BID BECAUSE OF THE FOLLOWING FACTORS. IT IS POINTED OUT THAT THE PROPERTY OFFERED FOR SALE UNDER ITEM 98 CONSISTED OF SCRAP METAL; THAT IT IS A GENERALLY ACCEPTED FACT THAT BIDS ON SCRAP METAL DO NOT VARY AS GREATLY AS DO BIDS ON USEABLE SURPLUS PROPERTY; AND THAT THERE IS A SUBSTANTIAL DISPARITY BETWEEN THE CORPORATION'S BID ON ITEM 98 AND THE NEXT HIGH BID AND THE CURRENT MARKET APPRAISAL OF THAT ITEM. WE AGREE WITH THE CENTER THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND THAT THE BID SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. SEE B- 169892, JUNE 3, 1970; B-172880, JUNE 2, 1971.

ACCORDINGLY, CONTRACT NO. 46-1096-092 MAY BE CANCELED WITHOUT LIABILITY TO THE CORPORATION AS ADMINISTRATIVELY RECOMMENDED.