B-173990, DEC 29, 1971

B-173990, DEC 29, 1971

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED OCTOBER 26, 1971, FILE REFERENCE FAC 0211E:RSL:WH, WITH ENCLOSURES, FROM THE NAVAL FACILITIES ENGINEERING COMMAND, FURNISHING THE REPORT REQUESTED BY OUR OFFICE RELATIVE TO THE REQUEST OF THE DELTA LINE CONSTRUCTION CO., PLEASANTVILLE, NEW JERSEY, FOR RELIEF ON ACCOUNT OF AN ALLEGED MISTAKE IN ITS BID UPON WHICH CONTRACT NO. N62472-70-C-0042 IS BASED.

THE EAST CENTRAL DIVISION, LATER KNOWN AS THE NORTHERN DIVISION, NAVAL FACILITIES ENGINEERING COMMAND, PHILADELPHIA, PENNSYLVANIA, BY INVITATION NO. N624270-B-0042, SPECIFICATION NO. 04-70-0042, REQUESTED BIDS - TO BE OPENED JUNE 24, 1970 - FOR FURNISHING LABOR AND MATERIALS AND FOR PERFORMING ALL WORK REQUIRED FOR THE CONSTRUCTION OF A VISUAL LANDING AIDS FACILITY, FIXED WING (INCREMENT 2), AT THE NAVAL AIR STATION, LAKEHURST, NEW JERSEY. THE WORK TO BE PERFORMED WAS SET OUT IN THREE ITEMS. THE DELTA LINE CONSTRUCTION COMPANY (DELTA) SUBMITTED A BID DATED JUNE 24, 1970, OFFERING TO PERFORM THE WORK AT THE PRICES SET FORTH OPPOSITE ITEMS 1, 2, 3 OR FOR AN AGGREGATE TOTAL PRICE OF $89,768. THE ABSTRACT OF BIDS SHOWS THAT THE SIX OTHER BIDDERS QUOTED AGGREGATE TOTAL BID PRICES RANGING FROM $138,827 TO $235,994, AND THAT THE GOVERNMENT'S ESTIMATE WAS IN THE AMOUNT OF $146,000. THE BID OF DELTA WAS ACCEPTED ON JUNE 30, 1971.

BY LETTER DATED AUGUST 18, 1971, TO OUR OFFICE, DELTA REQUESTED THAT THE CONTRACT PRICE OF THE PROJECT BE INCREASED BY $10,164.53 TO COVER AN ERROR MADE BY THE COMPANY ON ITS WORKSHEET. THE AMOUNT OF $10,164.53 INCLUDES $1,141.46 FOR OVERHEAD (15 PERCENT), $1,312.68 FOR PROFIT (15 PERCENT), AND $100.64 FOR BID BOND COST (1 PERCENT). DELTA ALLEGES THAT IN COMPUTING THE COST OF THE CONCRETE DUCT WORK, IT ERRONEOUSLY USED A PRICE OF $15.25 PER 100 LINEAR FEET - THE PRICE USED FOR ELECTRICAL DUCT WORK - RATHER THAN A PRICE OF $15.25 PER CUBIC YARD, THE PRICE INTENDED FOR CONCRETE DUCT WORK, AND THAT AS A RESULT, IT ARRIVED AT A TOTAL PRICE OF $76.10 INSTEAD OF THE CORRECT TOTAL PRICE OF $7,609.75 FOR THE WORK. SUPPORT OF ITS ALLEGATION OF ERROR, THE COMPANY SUBMITTED ITS WORKSHEETS. ONE OF THE ITEMS SHOWN THEREON IS A QUANTITY OF "CONCRETE DUCT" LISTED AS "499". ALSO, UNIT AND TOTAL PRICES OF $15.25C AND $76.10, RESPECTIVELY, ARE SHOWN, THE "C" PLACED AFTER THE UNIT PRICE FIGURE INDICATING THAT THE PRICE IS PER 100 LINEAR FEET. FURTHER, A SUPPLIER QUOTE FOR ELECTRICAL DUCT WORK QUOTES THE IDENTICAL UNIT PRICE ON A PER 100 LINEAR FEET BASIS. SINCE THE FOREGOING ITEM INVOLVES CONCRETE WORK, IT IS OBVIOUS THAT THE PRICE OF $15.25 SHOULD HAVE BEEN SHOWN AS THE UNIT PRICE FOR ONE CUBIC YARD RATHER THAN 100 LINEAR FEET, SINCE THIS IS THE BASIS ON WHICH CONCRETE WORK IS CUSTOMARILY ESTIMATED.

IN ITS LETTER OF AUGUST 18, 1971, DELTA STATES THAT PRIOR TO THE AWARD OF THE CONTRACT, THE CONTRACTING OFFICER REQUESTED THE FIRM TO VERIFY ITS BID AND THAT AFTER REVIEWING ITS COST DATA, IT CONFIRMED ITS BID PRICE. THIS CONNECTION, THE NAVAL FACILITIES ENGINEERING COMMAND STATES IN ITS LETTER OF OCTOBER 26, 1971, THAT A REVIEW OF THE CONTRACT FILE DOES NOT INDICATE THAT ANY LETTER WAS EVER SENT TO, OR RECEIVED FROM, DELTA CONCERNING BID CONFIRMATION, BUT THAT IT IS QUITE POSSIBLE THAT THE BID VERIFICATION WAS CONDUCTED BY TELEPHONE. IT ALSO IS STATED THAT ORDINARILY THE CONFIRMATION IS REQUESTED IN WRITING, BUT THAT AT THE TIME IN QUESTION, THE NORTHERN DIVISION OF THE COMMAND HAD VERY RECENTLY CONSOLIDATED WITH THREE OTHER FIELD DIVISIONS, AND THAT THIS FACTOR, COUPLED WITH THE LATE JUNE RUSH OF PROCUREMENT ACTIONS, WAS NO DOUBT RESPONSIBLE FOR THE APPARENT FAILURE TO FOLLOW ESTABLISHED PROCEDURES. VIEW OF THE FOREGOING, THERE APPEARS A PROPER BASIS FOR ASSUMING THAT DELTA WAS REQUESTED TO AND DID VERIFY ITS BID BY TELEPHONE.

A BIDDER WHO MAKES A MISTAKE IN A BID WHICH HAS BEEN ACCEPTED IN GOOD FAITH BY THE GOVERNMENT BEARS THE CONSEQUENCES OF HIS MISTAKE UNLESS THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER PRIOR TO AWARD, HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE MISTAKE. HOWEVER, IF A PARTY TO A CONTRACT MAKES A MATERIAL MISTAKE AND THE OTHER PARTY HAS REASON TO KNOW OF THE MISTAKE, THE LATTER PARTY MAY NOT TAKE ADVANTAGE OF THE PARTY MAKING THE MISTAKE BUT THE LATTER MAY SEEK RESCISSION AND RESTITUTION. 48 COMP. GEN. 672, 674-675 (1969).

THE EVIDENCE PRESENTED BY DELTA SUPPORTS THE CONCLUSION THAT IT DID, IN FACT, SUBMIT A MISTAKEN BID. MOREOVER, THE BID, IF CORRECTED, WOULD REMAIN THE LOWEST BID RECEIVED UNDER THE INVITATION.

THE AWARD OF A CONTRACT AFTER A BID HAS BEEN VERIFIED PURSUANT TO THE REQUEST OF A CONTRACTING OFFICER ORDINARILY RESULTS IN A BINDING CONTRACT. HOWEVER, A CONTRACTING OFFICER CANNOT DISCHARGE HIS DUTY TO VERIFY MERELY BY REQUESTING CONFIRMATION OF THE BID PRICE; HE MUST INFORM THE BIDDER THAT HE SUSPECTS THAT A MISTAKE WAS MADE IN THE BID AND HE MUST EXPLAIN THE GROUNDS FOR HIS SUSPICION. 44 COMP. GEN. 383, 386 (1965); B- 166186, MARCH 26, 1969; B-172986, AUGUST 30, 1971. PARAGRAPH 2- 406.3(E)(1) OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES THAT IN THE CASE OF ANY SUSPECTED MISTAKE IN BID, CONTRACTING OFFICERS SHOULD IMMEDIATELY ADVISE THE BIDDER NOT ONLY OF THE VARIANCES IN THE BIDS, IMPORTANT CHARACTERISTICS OF THE SPECIFICATIONS AND CHANGES, IF ANY, IN REQUIREMENTS FROM PREVIOUS PURCHASES OF SIMILAR ITEMS BUT OF SUCH OTHER DATA PROPER FOR DISCLOSURE TO THE BIDDER AS WILL GIVE HIM NOTICE OF THE SUSPECTED MISTAKE.

FROM THE RECORD, IT MAY BE CONCLUDED THAT THE CONTRACTING OFFICER MERELY ASKED DELTA BY TELEPHONE TO MAKE AN "ON-THE-SPOT" VERIFICATION OF ITS PRICE, BUT DID NOT EXPLAIN THE NATURE AND EXTENT OF THE SUSPECTED MISTAKE. ACCORDINGLY, DELTA DID NOT RECEIVE FAIR AND ADEQUATE NOTICE OF THE MISTAKE WHICH THE PROCUREMENT AGENCY BELIEVED MIGHT HAVE OCCURRED. UNDER THESE CIRCUMSTANCES, THE GOVERNMENT CANNOT TAKE ADVANTAGE OF DELTA'S MISTAKE.

IN ITS LETTER OF OCTOBER 26, 1971, THE NAVAL FACILITIES ENGINEERING COMMAND RECOMMENDS THAT THE CONTRACT PRICE OF THE PROJECT WORK BE INCREASED BY $9,963.26 INSTEAD OF $10,164.53, AS REQUESTED BY DELTA. THE COMMAND'S LETTER INDICATES THAT THE AMOUNT OF $9,963.26 WAS ARRIVED AT IN THE FOLLOWING MANNER:

"BASE AMOUNT ($15.25X499-$76.10) $7,533.65

OVERHEAD AT 15% 1,130.05

PROFIT AT 15% 1,299.56

TOTAL $9,963.26"

IN REGARD TO THE AMOUNT REQUESTED BY DELTA, THE COMMAND STATES THAT IN COMPUTING ITS REQUESTED ADJUSTMENT, THE COMPANY HAS FAILED TO DEDUCT THE $76.10 ORIGINALLY INCLUDED IN ITS BID FOR CONCRETE WORK. IT ALSO STATES THAT IT IS OF THE OPINION THAT THE AMOUNT OF $100.64 CLAIMED BY DELTA AS ADDITIONAL BID BOND COSTS SHOULD NOT BE ALLOWED. IN REGARD TO THE AMOUNT OF $100.64 CLAIMED BY DELTA AS ADDITIONAL BID BOND COSTS, IT IS OUR OPINION THAT NO PART OF THE AMOUNT CLAIMED SHOULD BE ALLOWED SINCE SUCH COST WAS NEVER INCURRED BY DELTA AS THE COST OF THE BID BOND ACTUALLY INCURRED BY THE COMPANY WAS BASED ON THE ORIGINAL ERRONEOUS BID PRICE.

THE RECORD INDICATES THAT DELTA HAS COMPLETED THE CONTRACT WORK. ACCORDINGLY, CONTRACT NO. N62472-70-C-0042 MAY BE AMENDED TO INCREASE THE CONTRACT PRICE OF THE PROJECT BY $9,963.26, AS ADMINISTRATIVELY RECOMMENDED.