B-173983, OCT 26, 1971

B-173983: Oct 26, 1971

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ALTHOUGH A WIDE RANGE OF BID PRICES IN RESPONSE TO A SURPLUS SALE WILL NORMALLY NOT BE SUFFICIENT TO PLACE A CONTRACTING OFFICER ON NOTICE OF ERROR. IN THIS CASE HE SHOULD HAVE BEEN ON NOTICE SINCE THE BID AMOUNTED TO A 172.5 PERCENT RETURN OVER INITIAL ACQUISITION COSTS OF THE ITEM. WAS THREE TIMES THE SECOND HIGH BID. TO GENERAL ROBINSON: REFERENCE IS MADE TO LETTER DSAH-G DATED AUGUST 26. AWARD OF ITEM 50 WAS MADE TO R&H AS HIGH BIDDER ON JULY 30. ITS INTENDED BID OF $220 WAS MISTAKENLY TRANSPOSED AS $2. THE CURRENT MARKET APPRAISAL VALUE FOR ITEM 50 WAS $225. THE CONTRACTING OFFICER RECOGNIZED THAT THE R&H BID WAS THREE TIMES HIGHER THAN THE NEXT HIGH BID AND WAS IN EXCESS OF THE ACQUISITION COST.

B-173983, OCT 26, 1971

BID PROTEST - MISTAKE IN BID DECISION THAT A SALES CONTRACT LET TO R & H MACHINERY, INC., BY THE DEFENSE SURPLUS SALES OFFICE, JACKSONVILLE, FLA., SHOULD BE RESCINDED WITHOUT LIABILITY TO R & H. ALTHOUGH A WIDE RANGE OF BID PRICES IN RESPONSE TO A SURPLUS SALE WILL NORMALLY NOT BE SUFFICIENT TO PLACE A CONTRACTING OFFICER ON NOTICE OF ERROR, IN THIS CASE HE SHOULD HAVE BEEN ON NOTICE SINCE THE BID AMOUNTED TO A 172.5 PERCENT RETURN OVER INITIAL ACQUISITION COSTS OF THE ITEM, AND WAS THREE TIMES THE SECOND HIGH BID.

TO GENERAL ROBINSON:

REFERENCE IS MADE TO LETTER DSAH-G DATED AUGUST 26, 1971, FROM THE ASSISTANT COUNSEL, HEADQUARTERS, CAMERON STATION, REQUESTING A DECISION ON THE CLAIM OF R & H MACHINERY, INC. (R&H), FOR RELIEF FROM A MISTAKE IN BID ALLEGED ON ITEM 50 OF SALES CONTRACT NO. 23-2005-216, AWARDED BY THE DEFENSE SURPLUS SALES OFFICE, JACKSONVILLE, FLORIDA.

IN RESPONSE TO SALES INVITATION NO. 23-2005, R&H SUBMITTED A BID IN THE AMOUNT OF $2,200 FOR ITEM 50, DESCRIBED AS A USED "DRILLING MACHINE, UPRIGHT, ROUND COLUMN, STANDARD," IN FAIR CONDITION, REPAIRS REQUIRED, WITH AN ACQUISITION COST OF $1,275. AWARD OF ITEM 50 WAS MADE TO R&H AS HIGH BIDDER ON JULY 30, 1971. THEREAFTER, BY TELEPHONE CALL OF AUGUST 3 AND LETTER OF AUGUST 4, 1971, R&H CLAIMED THAT DUE TO A TYPIST'S ERROR, ITS INTENDED BID OF $220 WAS MISTAKENLY TRANSPOSED AS $2,200 FOR ITEM 50.

THE OTHER BIDS RECEIVED FOR ITEM 50 RANGED FROM $50 TO $778.77. THE CURRENT MARKET APPRAISAL VALUE FOR ITEM 50 WAS $225. IN HIS REPORT, IN WHICH HE RECOMMENDED THAT ITEM 50 OF THE CONTRACT BE DELETED, THE CONTRACTING OFFICER RECOGNIZED THAT THE R&H BID WAS THREE TIMES HIGHER THAN THE NEXT HIGH BID AND WAS IN EXCESS OF THE ACQUISITION COST. IN THIS RESPECT, THE PERCENT RETURN AMOUNTED TO 172.55 PERCENT. IN VIEW OF THE FOREGOING, THE SALES CONTRACTING OFFICER STATED THAT HE SHOULD HAVE BEEN ON NOTICE THAT A MISTAKE IN BID EXISTED. THIS VIEW IS CONCURRED IN BY THE ACTING COUNSEL, DEFENSE LOGISTICS SERVICES CENTER, AND THE ASSISTANT COUNSEL.

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. SEE B-171828, MARCH 17, 1971; B-171229, FEBRUARY 17, 1971. ALSO, SEE UNITED STATES V SABIN METAL CORPORATION, 151 F. SUPP. 683 (1957), AFFIRMED 253 F. 2D 956 (1958); AND WENDER PRESSES, INC. V UNITED STATES, 343 F. 2D 961 (1965). HOWEVER, IN THIS CASE, THE R&H BID PRICE ON ITEM 50 WAS NEARLY THREE TIMES THE AMOUNT OF THE NEXT HIGH BID PRICE AND ALMOST 10 TIMES THE CURRENT MARKET APPRAISAL OF $225. MOREOVER, THE R&H BID WAS CLOSE TO TWICE THE ORIGINAL ACQUISITION COST OF $1,275.

ACCORDINGLY, IT MAY BE CONCLUDED THAT THE SALES CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR AND THAT THE R&H BID SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. WE THEREFORE CONCUR IN THE ADMINISTRATIVE RECOMMENDATION THAT ITEM 50 OF SALES CONTRACT NO. 23 2005-216 SHOULD BE RESCINDED WITHOUT LIABILITY TO THE CORPORATION.