B-173596, NOV 30, 1971

B-173596: Nov 30, 1971

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WHERE A MISTAKE IS SO APPARENT THAT THE CONTRACTING OFFICER MUST BE ASSUMED TO HAVE KNOWLEDGE OF IT. THE DISCREPANCY IN THIS CASE SHOULD HAVE INDICATED TO THE CONTRACTING OFFICER THE PROBABILITY THAT THE TOTAL LINE ITEM PRICE DID NOT ACTUALLY REPRESENT THE INTENDED PRICE. A MODIFICATION TO THE SUBJECT CONTRACT WAS ENTERED INTO ESTABLISHING A SPARE PARTS LIST. LISTED THEREON WERE A QUANTITY OF 90 ROLLER ADAPTORS. SPEN WAS INFORMED BY THE ACTIVITY THAT FUNDING LIMITATIONS REQUIRED REVISION OF THE SPARE PARTS REQUIREMENT. AT THIS POINT SPEN MADE AN ERROR IN EXTENDING THE UNIT PRICE BY MULTIPLYING $47.19 BY 9 FOR A TOTAL LINE ITEM PRICE OF $424.71 INSTEAD OF BY 90 WHICH WOULD HAVE RESULTED IN THE CORRECT TOTAL LINE PRICE OF $4.

B-173596, NOV 30, 1971

CONTRACT - REVISION IN PRICE - MISTAKE DECISION ALLOWING A REVISION IN THE PRICE OF A MODIFICATION TO A CONTRACT LET TO HENRY SPEN & COMPANY, INC., BY THE NAVAL AIR SYSTEMS COMMAND. WHERE A MISTAKE IS SO APPARENT THAT THE CONTRACTING OFFICER MUST BE ASSUMED TO HAVE KNOWLEDGE OF IT, THE GOVERNMENT CANNOT TAKE ADVANTAGE OF THE CONTRACTOR BY HOLDING IT TO A CONTRACT IT HAD NO INTENTION OF MAKING. SEE 20 COMP. GEN. 652 (1941). THE DISCREPANCY IN THIS CASE SHOULD HAVE INDICATED TO THE CONTRACTING OFFICER THE PROBABILITY THAT THE TOTAL LINE ITEM PRICE DID NOT ACTUALLY REPRESENT THE INTENDED PRICE.

TO MR. SECRETARY:

WE REFER TO A LETTER DATED SEPTEMBER 29, 1971, FROM THE ACTING COUNSEL, NAVAL AIR SYSTEMS COMMAND (NAVAIR) CONCERNING THE REQUEST OF COUNSEL ON BEHALF OF HENRY SPEN & COMPANY, INCORPORATED (SPEN), FOR AN UPWARD REVISION IN PRICE OF MODIFICATION NO. A00002 TO CONTRACT NO. NOWH) 66-0072 -F, BASED ON A MISTAKE OF $3,593.16 ALLEGED AFTER ACCEPTANCE OF A MODIFICATION OF THE CONTRACT BY NAVAIR, WASHINGTON, D.C.

ON NOVEMBER 21, 1968, A MODIFICATION TO THE SUBJECT CONTRACT WAS ENTERED INTO ESTABLISHING A SPARE PARTS LIST, ITEM 4AA, AND PLACING A LIMITATION OF FUNDING THEREON OF $36,726.75 SUBJECT TO LATER PRICE NEGOTIATIONS. MARCH 6, 1970, SPEN SUBMITTED A QUOTATION AGAINST THE PARTS LIST IN THE AMOUNT OF $52,676.77. LISTED THEREON WERE A QUANTITY OF 90 ROLLER ADAPTORS, P/N 600322-1, AT A QUOTED PRICE OF $44.11 EACH FOR AN EXTENDED TOTAL LINE ITEM PRICE OF $3,969.

ON MAY 14, 1970, SPEN WAS INFORMED BY THE ACTIVITY THAT FUNDING LIMITATIONS REQUIRED REVISION OF THE SPARE PARTS REQUIREMENT. ON MAY 27, 1970, SPEN ACCEPTED THE REVISED PARTS LIST WITH TWO EXCEPTIONS, ONE OF WHICH PERTAINED TO MODIFICATION OF THE SUBJECT ROLLER ADAPTOR. SPEN THEN FURTHER REVISED THE LIST INCREASING THE UNIT PRICE OF THE ROLLER ADAPTOR TO $47.19 EACH. AT THIS POINT SPEN MADE AN ERROR IN EXTENDING THE UNIT PRICE BY MULTIPLYING $47.19 BY 9 FOR A TOTAL LINE ITEM PRICE OF $424.71 INSTEAD OF BY 90 WHICH WOULD HAVE RESULTED IN THE CORRECT TOTAL LINE PRICE OF $4,247.10. ON JUNE 30, 1970, PRICE NEGOTIATIONS WERE CONDUCTED ON THE BASIS OF THE TOTAL COST OF ALL THE LISTED PARTS RESULTING IN A BOTTOM LINE TOTAL PRICE DECREASE OF SIX PERCENT. THE PRICES OF THE DIFFERENT PARTS MAKING UP THE LIST WERE NOT INDIVIDUALLY DISCUSSED. THE DECREASE WAS INDICATED BY REDUCING THE LINE ITEM UNIT PRICES AND THE VARIOUS TOTAL PRICES BY SIX PERCENT. THE MODIFICATION WAS ISSUED ON JUNE 30, 1970, INCREASING THE CONTRACT PRICE IN THE AMOUNT OF $31,741.62. SPEN DID NOT DISCOVER THE ERROR UNTIL OCTOBER 29, 1970. THE AGENCY AGREES THAT A MATHEMATICAL ERROR WAS MADE AND RECOMMENDS THAT SPEN BE RELIEVED OF ITS CONSEQUENCES.

GENERALLY, A CONTRACT WILL NOT BE REFORMED WHEN A UNILATERAL ERROR IN THE PRICE IS ALLEGED AFTER THE CONTRACT HAS BEEN AWARDED BECAUSE ONCE THE OFFER HAS BEEN ACCEPTED, A BINDING CONTRACT IS FORMED AND THE CONTRACTOR MUST BEAR THE CONSEQUENCES OF HIS OWN ERROR. SEE OGDEN & DOUGHERTY V UNITED STATES, 102 CT. CL. 249 (1944). HOWEVER, WHERE A MISTAKE IS SO APPARENT THAT THE CONTRACTING OFFICER MUST BE ASSUMED TO HAVE KNOWLEDGE OF IT, THE GOVERNMENT CANNOT TAKE ADVANTAGE OF THE CONTRACTOR BY HOLDING IT TO A CONTRACT IT HAD NO INTENTION OF MAKING. SEE 20 COMP. GEN. 652 (1941).

ON THE BASIS OF THE FACTS CONTAINED IN THE RECORD, THERE IS LITTLE ROOM FOR DOUBT THAT SPEN MADE A BONA FIDE ERROR IN ITS OFFER.

IN OUR OPINION, THE DISCREPANCY BETWEEN THE UNIT PRICE AND THE EXTENDED PRICE, COMBINED WITH THE SUBSTANTIALLY HIGHER PRICE QUOTED ON THESE ITEMS IN SPEN'S OFFER OF MARCH 6, 1970, SHOULD HAVE INDICATED TO THE CONTRACTING OFFICER THE PROBABILITY THAT THE UNIT PRICE DID NOT ACTUALLY REPRESENT THE INTENDED PRICE. WE CONCLUDE, THEREFORE, THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR, AND UNDER THE WELL ESTABLISHED RULE, THE CONTRACT MAY BE AMENDED TO REFLECT THE INTENDED FIGURE.

ACCORDINGLY, SINCE SPEN'S INTENDED PRICE HAS BEEN ESTABLISHED, MODIFICATION NO. A00002 TO CONTRACT NO. NOWH) 66-0072-F MAY BE AMENDED TO PROVIDE FOR A TOTAL PRICE OF ITEM 4AA TO $35,334.79, AND PAYMENT IS AUTHORIZED TO BE MADE ON THAT BASIS. IT APPEARS THAT THE CONTRACTOR'S FIGURE OF $35,334.78 IS THE RESULT OF A MATHEMATICAL ERROR IN THE CALCULATION OF THE SIX PERCENT REDUCTION OF THE ORIGINAL $424.71 TOTAL PRICE.

A REFERENCE TO THIS DECISION SHOULD BE MADE ON THE AMENDMENT TO THE CONTRACT.