B-175302, MAY 1, 1972

B-175302: May 1, 1972

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IT IS NOTED THAT HARBOR'S WORKSHEETS CONTAIN NO REFERENCE TO EITHER OVERHEAD OR PROFIT AND SINCE NO JOB ORDER COST SYSTEM OF ACCOUNTING IS USED. THE ARMY AUDIT INDICATES THAT OVERHEAD AND PROFIT WERE POSSIBLY INCLUDED IN THE LABOR AND EQUIPMENT ELEMENTS OF THE BID. SIX BIDS WERE TIMELY RECEIVED IN RESPONSE TO THE IFB WHICH COVERED THE REPLACEMENT AND REPAIR OF CERTAIN FACILITIES AT THE CAPE COD CANAL. REVEALED THAT HARBOR WAS THE APPARENT LOW BIDDER AT $21. BY MORE THAN 25 PERCENT AND WERE ELIMINATED FROM FURTHER CONSIDERATION. HARBOR WAS REQUESTED TO VERIFY ITS BID. HARBOR FORMALLY NOTIFIED THE PROCUREMENT ACTIVITY THAT IT HAD ERRONEOUSLY OMITTED A 25-PERCENT FACTOR FOR OVERHEAD AND PROFIT AND THAT ITS BID PRICE SHOULD HAVE BEEN INCREASED BY $5.

B-175302, MAY 1, 1972

BID PROTEST - ALLEGED MISTAKE IN BID - REQUESTED PRICE INCREASE DECISION DENYING THE CLAIM OF HARBOR CONSTRUCTION CO., INC., FOR AN INCREASE IN THE PRICE OF ITS CONTRACT AWARDED UNDER AN IFB FOR THE REPLACEMENT AND REPAIR OF CERTAIN FACILITIES AT THE CAPE COD CANAL. IT IS NOTED THAT HARBOR'S WORKSHEETS CONTAIN NO REFERENCE TO EITHER OVERHEAD OR PROFIT AND SINCE NO JOB ORDER COST SYSTEM OF ACCOUNTING IS USED, THESE ITEMS CANNOT BE ASCERTAINED FROM THE INDIVIDUAL JOB UNDER THE CONTRACT. FURTHER, THE ARMY AUDIT INDICATES THAT OVERHEAD AND PROFIT WERE POSSIBLY INCLUDED IN THE LABOR AND EQUIPMENT ELEMENTS OF THE BID. THESE CIRCUMSTANCES, THE REQUEST FOR REFORMATION MUST BE DENIED.

TO MR. SECRETARY:

WE REFER TO A LETTER, DAEN-GCC, DATED FEBRUARY 24, 1972, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, REGARDING THE CLAIM OF HARBOR CONSTRUCTION CO., INC. (HARBOR), FOR AN INCREASE IN THE PRICE OF ITS CONTRACT AWARDED UNDER INVITATION FOR BIDS (IFB) DACW33-71-B 0048.

SIX BIDS WERE TIMELY RECEIVED IN RESPONSE TO THE IFB WHICH COVERED THE REPLACEMENT AND REPAIR OF CERTAIN FACILITIES AT THE CAPE COD CANAL. BID OPENING, ON JUNE 23, 1971, REVEALED THAT HARBOR WAS THE APPARENT LOW BIDDER AT $21,820. ALL REMAINING BIDS EXCEEDED THE GOVERNMENT ESTIMATE OF $31,800, WITHOUT PROFIT, BY MORE THAN 25 PERCENT AND WERE ELIMINATED FROM FURTHER CONSIDERATION. SEE 33 U.S.C. 624.

BECAUSE OF THE DISCREPANCY BETWEEN HARBOR'S PRICE AND THE GOVERNMENT ESTIMATE, HARBOR WAS REQUESTED TO VERIFY ITS BID. ON JUNE 28, 1971, HARBOR FORMALLY NOTIFIED THE PROCUREMENT ACTIVITY THAT IT HAD ERRONEOUSLY OMITTED A 25-PERCENT FACTOR FOR OVERHEAD AND PROFIT AND THAT ITS BID PRICE SHOULD HAVE BEEN INCREASED BY $5,455 TO $27,275. HOWEVER, HARBOR STATED THAT IT WOULD STILL BE WILLING TO ACCEPT AWARD ON THE BASIS OF ITS ORIGINAL BID SUBJECT TO LATER DECISION ON THE VALIDITY OF THE ERROR. SINCE THE CURRENT FISCAL YEAR WAS COMING TO A CLOSE, A CONTRACT WAS AWARDED TO HARBOR ON JUNE 30, 1971, AT ITS ORIGINAL BID PRICE BUT THE CONTRACT RESERVED ITS RIGHT TO SEEK RELIEF FOR THE MISTAKE ALLEGED. THE CONTRACT HAS BEEN COMPLETED AND THE CONTRACTING OFFICER RECOMMENDS THAT THE CONTRACT PRICE BE INCREASED BY THE FULL AMOUNT CLAIMED. WE DO NOT AGREE.

HARBOR'S WORKSHEETS, SUBMITTED IN SUBSTANTIATION OF THE MISTAKE, CONTAIN NO REFERENCE WHATEVER TO EITHER OVERHEAD OR PROFIT WHICH HARBOR CONTENDS IS NORMALLY 15 AND 10 PERCENT, RESPECTIVELY. SINCE NO JOB ORDER COST SYSTEM OF ACCOUNTING IS USED, THESE ITEMS CANNOT BE ASCERTAINED FOR ANY INDIVIDUAL JOB, INCLUDING THE ONE UNDER THIS CONTRACT. MOREOVER, ALTHOUGH AN ARMY AUDIT DEVELOPED AN OVERHEAD (BUT NOT PROFIT) RATE WHICH COULD BE CONSIDERED THE "NORMAL" OVERHEAD FOR THE FIRM, WE AGREE WITH THE STATEMENT OF THE ADMINISTRATIVE REPORT THAT THE AUDIT INDICATES THAT OVERHEAD AND PROFIT WERE POSSIBLY INCLUDED IN THE LABOR AND EQUIPMENT ELEMENTS OF THE BID WITH NO INTENTION ON HARBOR'S PART TO ADD FURTHER MARKUPS.

IN THESE CIRCUMSTANCES, WE CANNOT CONCLUDE THAT HARBOR HAS PROVEN BY CLEAR AND CONVINCING EVIDENCE THAT IT INTENDED TO INCLUDE THE CLAIMED OVERHEAD AND PROFIT AMOUNTS IN ITS BID AND, ACCORDINGLY, THE CLAIM FOR REFORMATION OF THE CONTRACT IS DENIED.