B-173905, SEP 9, 1971

B-173905: Sep 9, 1971

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RELIEF FROM A MISTAKE IN BID MAY BE GIVEN ONLY IF THERE IS KNOWLEDGE OF THE ERROR ON THE PART OF THE CONTRACTING OFFICER. THERE IS NOTHING IN THIS RECORD TO INDICATE THAT THE CONTRACTING OFFICER EITHER KNEW OF THE ERROR. OR THAT HE SHOULD HAVE BEEN ON NOTICE OF IT.THEREFORE. IT MUST BE CONCLUDED THAT THE BID WAS ACCEPTED IN GOOD FAITH AND THEREFORE CONSUMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES. TO GENERAL ROBINSON: REFERENCE IS MADE TO A LETTER DATED AUGUST 17. WHICH WAS SUBJECT TO CHANGE AS HE RECEIVED QUOTATIONS FOR REMOVAL AND TRUCKING OF THE ITEM. THESE BIDS WERE HIGHER THAN ANTICIPATED BECAUSE THE MACHINERY WAS LOCATED IN A PIT. IN THAT IT WAS EQUIPPED WITH A FIXED RAIL INSTEAD OF A MOVABLE RAIL.

B-173905, SEP 9, 1971

BID PROTEST - MISTAKE IN BID DECISION DENYING RELIEF TO FAZCO MACHINERY, INC., FOR AN ALLEGED MISTAKE IN BID MADE UNDER AN IFB ISSUED BY NTW MISSILE ENGINEERING, INC. RELIEF FROM A MISTAKE IN BID MAY BE GIVEN ONLY IF THERE IS KNOWLEDGE OF THE ERROR ON THE PART OF THE CONTRACTING OFFICER. THERE IS NOTHING IN THIS RECORD TO INDICATE THAT THE CONTRACTING OFFICER EITHER KNEW OF THE ERROR, OR THAT HE SHOULD HAVE BEEN ON NOTICE OF IT.THEREFORE, IT MUST BE CONCLUDED THAT THE BID WAS ACCEPTED IN GOOD FAITH AND THEREFORE CONSUMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES.

TO GENERAL ROBINSON:

REFERENCE IS MADE TO A LETTER DATED AUGUST 17, 1971, WITH ENCLOSURES, REFERENCE DSAH-G, FROM YOUR ASSISTANT COUNSEL RELATIVE TO THE MISTAKE IN BID ALLEGED BY FAZCO MACHINERY, INC. (FAZCO), UNDER INVITATION FOR BID NO. 1-AB ISSUED BY NTW MISSILE ENGINEERING, INC. (NTW), A GOVERNMENT CONTRACTOR.

THE ABOVE-REFERENCED INVITATION, ISSUED ON MAY 14, 1971, OFFERED FOR SALE 17 ITEMS OF GOVERNMENT OWNED INDUSTRIAL PLANT EQUIPMENT. NINE OF THE 26 BIDDERS RESPONDING TO THE INVITATION BID AS FOLLOWS UPON ITEM 11, A 1952 MODEL BETTS BORING AND TURNING MACHINE:

FAZCO $35,101.79

PEARL EQUIP. CO. 21,229.00

GIVEN INTERNATIONAL 17,781.00

EVEREADY MACH. CO. 16,999.99

DE-SKAL ENG. 13,567.89

S AND S MACH. CO. 11,777.77

LEWIS MACH. SALES 10,211.99

MORTON MACHINERY 7,577.00

HARDY MACHINERY 7,516.00

ON JUNE 4, 1971, THE GOVERNMENT'S PLANT CLEARANCE OFFICER NOTIFIED NTW OF HIS APPROVAL OF THE SELECTED HIGH BIDDERS ON THE INVITATION. ACCORDANCE THEREWITH, NTW BY AWARD LETTER OF JUNE 7, 1971, NOTIFIED FAZCO OF THE SALE AWARD TO IT OF ITEM 11 AT $35,101.76.

SEVERAL DAYS AFTER RECEIPT OF THE AWARD LETTER, MR. FRANK A. ZARATE, PRESIDENT OF FAZCO, NOTIFIED THE PLANT CLEARANCE OFFICER THAT A MISTAKE HAD OCCURRED IN THE PREPARATION OF HIS BID. MR. ZARATE ALLEGES THAT HE HAD ARRIVED AT A TENTATIVE BID FOR ITEM 11 OF $35,101.76, WHICH WAS SUBJECT TO CHANGE AS HE RECEIVED QUOTATIONS FOR REMOVAL AND TRUCKING OF THE ITEM. HE FURTHER STATES THAT HE LEFT HIS SIGNED BID FORM AT HIS OFFICE WITH NO PRICE INSERTED FOR ITEM 11, WHILE HE WENT OUT OF TOWN TO OBTAIN THE TRUCKING BIDS. THESE BIDS WERE HIGHER THAN ANTICIPATED BECAUSE THE MACHINERY WAS LOCATED IN A PIT. MR. ZARATE ALSO OBSERVED THAT THE MACHINE LACKED VERSATILITY, IN THAT IT WAS EQUIPPED WITH A FIXED RAIL INSTEAD OF A MOVABLE RAIL, AND THUS MAY HAVE BEEN OF LESSER VALUE ON RESALE. THEREFORE, MR. ZARATE ALLEGES, HE MADE A TELEPHONE CALL FROM THE AIRPORT TO HIS SALESMAN, INSTRUCTING HIM TO ENTER A REDUCED BID OF $25,101.76 ON ITEM 11, AND TO REVISE THE BID ON ITEM 10. IT IS NOT CLEAR WHETHER THE SALESMAN MISUNDERSTOOD MR. ZARATE'S INSTRUCTIONS OR WHETHER MR. ZARATE MISUNDERSTOOD THE RE-READING OF THE BID BACK TO HIM BY THE SALESMAN. IN ANY EVENT, IT IS UNDISPUTED THAT THE BID ACTUALLY SUBMITTED BY FAZCO FOR ITEM 11 WAS $35,101.76.

IN SUPPORT OF HIS ALLEGATION OF MISTAKE, MR. ZARATE FURNISHED A PHOTOSTATIC COPY OF THE BID SCHEDULE ACTUALLY SUBMITTED AND ANOTHER COPY OF THE SCHEDULE UPON WHICH HE ALLEGEDLY ENTERED HIS REVISIONS IN THE TELEPHONE BOOTH. THE LATTER COPY CONTAINS A NOTATION TO CHANGE THE BID FOR ITEM 10 FROM $2,276.76 TO $1,576.76, WHICH WAS DONE ON THE BID SUBMITTED BY A STRIKEOVER INITIALED BY THE SALESMAN. HOWEVER, ALTHOUGH MR. ZARATE'S COPY OF THE SCHEDULE SHOWS A BID OF $25,101.76 FOR ITEM 11, THE ACTUAL BID ON THAT ITEM WAS $35,101.76.

THE BASIC ISSUE FOR CONSIDERATION HERE IS NOT WHETHER FAZCO MADE A MISTAKE IN ITS BID INSOFAR AS ITEM 11 WAS CONCERNED, BUT WHETHER THE ACCEPTANCE OF THE BID BY THE PLANT CLEARANCE OFFICER CONSUMMATED A VALID AND BINDING CONTRACT. ANY ERROR WHICH MAY HAVE BEEN MADE WAS DUE SOLELY TO THE NEGLIGENCE OF THE BIDDER SINCE THE INVITATION CLEARLY DESCRIBED THE ITEMS FOR SALE.

THE GENERAL PRINCIPLES APPLICABLE TO THIS CASE WERE SET OUT IN SALIGMAN V UNITED STATES, 56 F. SUPP. 505, 507, WHERE IT WAS HELD THAT IF THERE WAS A UNILATERAL MISTAKE IN BID BY THE PURCHASER AND HE WAS AWARDED THE CONTRACT HE WOULD BE BOUND BY IT AND MUST BEAR THE CONSEQUENCES UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE MISTAKE. IN THAT CASE, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. KEMP V UNITED STATES, 38 F. SUPP. 568; WENDER PRESSES, INC. V UNITED STATES, 343 F. 2D 961.

IT IS ADMINISTRATIVELY REPORTED THAT THE FAZCO REPRESENTATIVE PRESENT AT THE BID OPENING DID NOT QUESTION THE DIFFERENCE IN BIDS OR INDICATE THAT THERE WAS A MISTAKE IN THE FAZCO BID. THERE IS NO EVIDENCE IN THE PRESENT RECORD TO SUPPORT A CONCLUSION THAT THE PLANT CLEARANCE OFFICER ACCEPTED FAZCO'S BID WITH ACTUAL KNOWLEDGE OF ERROR.

WITH REGARD TO WHETHER THE PLANT CLEARANCE OFFICER HAD CONSTRUCTIVE NOTICE OF THE ERROR, THE GENERAL RULE APPLICABLE TO THE SALE OF SURPLUS MATERIAL IS THAT KNOWLEDGE OF THE BID MISTAKE CANNOT BE IMPUTED TO THE CONTRACTING OFFICER BY COMPARING THE DIFFERENT BIDS AND NOTING THEIR RELATION TO EACH OTHER BECAUSE DIFFERENCES IN THE PRICES BID FOR SURPLUS PROPERLY DO NOT HAVE THE SAME IMPLICATION AS WOULD LIKE DIFFERENCES IN PRICES QUOTED ON NEW EQUIPMENT OR SUPPLIES. PRICES OFFERED TO THE GOVERNMENT FOR ITS SURPLUS PROPERTY ARE BASED MORE OR LESS UPON THE USE TO BE MADE OF THE PROPERTY BY THE PARTICULAR BIDDER OR UPON THE RISK OF RESALE WHICH THE BIDDER MIGHT BE DESIRED TO TAKE. SEE UNITED STATES V SABIN METAL CORPORATION, 151 F. SUPP. 683, 689, AFFIRMED 253 F. 2D 956.

IN THE INSTANT CASE, FAZCO'S BID ON ITEM 11 REPRESENTED LESS THAN 21% OF THE EQUIPMENT'S ORIGINAL ACQUISITION COST OF $170,995. ALTHOUGH ITS BID PRICE ON ITEM 11 WAS 65% HIGHER THAN THE NEXT HIGH BID ON THIS ITEM, WE CANNOT CONCLUDE THAT THE DISPARITY WAS SO GREAT AS TO HAVE PLACED THE PLANT CLEARANCE OFFICER ON NOTICE OF THE PROBABILITY OF ERROR.

IN VIEW OF THE FOREGOING, AND SINCE THE BID WAS CLEAR AND UNAMBIGUOUS, AND NO ERROR WAS ALLEGED UNTIL AFTER AWARD, IT MUST BE CONCLUDED THAT THE BID WAS ACCEPTED IN GOOD FAITH AND THEREFORE CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES. UNITED STATES V PURCELL ENVELOPE COMPANY, 249 U.S. 313; AMERICAN SMELTING AND REFINING COMPANY V UNITED STATES, 259 U.S. 75.

ACCORDINGLY, IT IS OUR OPINION THAT THERE IS NO LEGAL BASIS FOR REDUCING THE CONTRACT PRICE ON ACCOUNT OF THE ALLEGED MISTAKE IN BID OR FOR RELIEVING FAZCO FROM ITS OBLIGATION UNDER THE CONTRACT.

THE FILE TRANSMITTED WITH THE LETTER FROM YOUR ASSISTANT COUNSEL IS RETURNED.