B-173841, OCT 18, 1971

B-173841: Oct 18, 1971

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CAPITOL'S BID WAS $17.01 PER TON WHILE THE MARKET VALUE WAS $6.00 AND THE ONLY OTHER BID $6.01 PER TON. ALTHOUGH A WIDE RANGE OF BID PRICES IS NORMALLY NOT SUFFICIENT. THE FACT THAT THE HIGH BID WAS NEARLY THREE TIMES THE MARKET PRICE AND ONLY OTHER BID MAY BE CONSIDERED TO HAVE PLACED THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF A MISTAKE. TO GENERAL ROBINSON: REFERENCE IS MADE TO LETTER DATED AUGUST 9. TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 11-1234-011 IS BASED. PROSPECTIVE BIDDERS WERE ADVISED UNDER THE LOADING TABLE THAT THE GOVERNMENT WOULD DELIVER THE SCRAP MATERIAL DESCRIBED UNDER ITEM 24 WITHIN AN 8 MILE RADIUS OF CAMERON STATION. THE BID OF CAPITOL WAS ACCEPTED AS TO ITEM 24 AND OTHER ITEMS ON JUNE 25.

B-173841, OCT 18, 1971

CONTRACTS - MISTAKES - CONSTRUCTIVE NOTICE DECISION THAT CAPITOL RECLAMATION CORPORATION MAY BE RELIEVED WITHOUT OBLIGATION ON CONTRACT WITH DEFENSE SURPLUS SALES OFFICE FOR PURCHASE OF AN AMOUNT OF SCRAP CARDBOARD. CAPITOL'S BID WAS $17.01 PER TON WHILE THE MARKET VALUE WAS $6.00 AND THE ONLY OTHER BID $6.01 PER TON. ALTHOUGH A WIDE RANGE OF BID PRICES IS NORMALLY NOT SUFFICIENT, IN THIS CASE, THE FACT THAT THE HIGH BID WAS NEARLY THREE TIMES THE MARKET PRICE AND ONLY OTHER BID MAY BE CONSIDERED TO HAVE PLACED THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF A MISTAKE.

TO GENERAL ROBINSON:

REFERENCE IS MADE TO LETTER DATED AUGUST 9, 1971, FILE REFERENCE DSAH G, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, HEADQUARTERS CAMERON STATION, ALEXANDRIA, VIRGINIA, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY THE DISTRICT WASTE MATERIALS DIVISION, CAPITOL RECLAMATION CORPORATION, TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 11-1234-011 IS BASED.

THE DEFENSE SURPLUS SALES OFFICE, PHILADELPHIA, PENNSYLVANIA, BY INVITATION FOR BIDS NO. 11-1234 REQUESTED BIDS UNDER ITEM 24 FOR THE PURCHASE OF 1,200 NET TONS OF SCRAP CORRUGATED CARDBOARD CONTAINERS LOCATED AT CAMERON STATION. PROSPECTIVE BIDDERS WERE ADVISED UNDER THE LOADING TABLE THAT THE GOVERNMENT WOULD DELIVER THE SCRAP MATERIAL DESCRIBED UNDER ITEM 24 WITHIN AN 8 MILE RADIUS OF CAMERON STATION. RESPONSE, THE DISTRICT WASTE MATERIALS DIVISION, CAPITOL RECLAMATION CORPORATION, SUBMITTED A BID DATED JUNE 21, 1971, OFFERING TO PURCHASE, AMONG OTHER ITEMS, ITEM 24 AT A PRICE OF $17.01 PER TON. THE BID OF CAPITOL WAS ACCEPTED AS TO ITEM 24 AND OTHER ITEMS ON JUNE 25, 1971.

ON JULY 1, 1971, THE SALES CONTRACTING OFFICER WAS CONTACTED BY THE PROPERTY DISPOSAL OFFICER WHO QUESTIONED THE AWARD OF ITEM 24 TO A CONTRACTOR LOCATED MORE THAN 8 MILES FROM THE LOCATION OF THE MATERIAL. THEREAFTER, THE SALES CONTRACTING OFFICER TELEPHONED CAPITOL IN AN EFFORT TO ASCERTAIN THE LOCATION OF THE POINT OF DELIVERY FOR THE GOVERNMENT. CAPITOL IMMEDIATELY ALLEGED AN ERROR IN ITS BID STATING THAT IT WAS UNAWARE OF THE LOADING SPECIFICATIONS AND THE FACT THAT THE PROPERTY UNDER ITEM 24 WAS NOT BALED.

IN A CONFIRMING LETTER DATED JULY 6, 1971, CAPITOL STATED THAT IT HAS HAD THE CAMERON STATION CONTRACT FOR SCRAP CARDBOARD MANY TIMES BEFORE AND THAT THE CARDBOARD HAS ALWAYS BEEN BALED. THE CORPORATION ALSO STATED THAT PRIOR TO FILLING OUT ITS BID IT CONTACTED A GOVERNMENT REPRESENTATIVE AT FORT BELVOIR, VIRGINIA, AND WAS TOLD THAT THE CARDBOARD WAS BALED.

THE ONLY OTHER BID RECEIVED ON ITEM 24 WAS IN THE AMOUNT OF $6.01 PER NET TON AND THE MARKET APPRAISAL FOR THE ITEM WAS $6 PER NET TON. THE SALES CONTRACTING OFFICER AND YOUR ASSISTANT COUNSEL HAVE RECOMMENDED THAT ITEM 24 BE CANCELED FROM CAPITOL'S CONTRACT. THE SALES CONTRACTING OFFICER CONCEDES THAT SHE SHOULD HAVE BEEN ON NOTICE OF THE ERROR AND SHOULD HAVE REQUESTED VERIFICATION PRIOR TO AWARD SINCE THE DISPARITY BETWEEN CAPITOL'S BID ON ITEM 24 AND THE NEXT HIGH BID ON THAT ITEM, TOGETHER WITH THE CURRENT MARKET APPRAISAL FOR THAT ITEM, WAS SUBSTANTIAL. IT IS ALSO CONCEDED THAT THE CONTRACTING OFFICER WAS ON NOTICE OF PROBABLE ERROR BY REASON OF THE FACT THAT CAPITOL ALSO SUBMITTED A BID OF $17.01 PER NET TON FOR ITEM 4 WHICH WAS DESCRIBED EXACTLY AS ITEM 24 EXCEPT THE CARDBOARD WAS BALED.

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. UNITED STATES V SABIN METAL CORPORATION, 151 F. SUPP. 683 (1957), AFFIRMED 253 F. 2D 956 (1958); WENDER PRESSES, INC. V UNITED STATES, 343 F. 2D 961 (1965). HOWEVER, HERE, THE BID PRICE OF CAPITOL ON UNBALED CARDBOARD UNDER ITEM 24 WAS ALMOST THREE TIMES THE AMOUNT OF THE ONLY OTHER BID AND THE CURRENT APPRAISAL FOR THE SCRAP DESCRIBED UNDER SUCH ITEM. CF. B-171229, FEBRUARY 17, 1971; B-169254, MARCH 25, 1970.

ACCORDINGLY, IT MAY BE CONCLUDED THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND THE HIGH BID OF CAPITOL ON ITEM 24 SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. WE THEREFORE CONCUR IN THE RECOMMENDATION THAT ITEM 24 OF SALES CONTRACT NO. 11-1234-011 BE CANCELED WITHOUT LIABILITY TO CAPITOL.