B-177944, JUN 6, 1974

B-177944: Jun 6, 1974

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REQUEST FOR RELIEF FROM DEFAULTED CONTRACT ON BASIS THAT CONTRACT WAS VOID AB INITIO IS DENIED SINCE SOLICITATION PROVIDING FOR OFFERS AND AWARDS ON ITEM BASIS WAS NOT AMBIGUOUS AND CONTRACTING OFFICER WAS NOT ON NOTICE OF POSSIBLE MISTAKE IN OFFERED PRICE. SINCE OFFERED PRICE WAS WITHIN RANGE OF PRICES REGARDED AS COMMERCIALLY AVAILABLE. GS-00S-10916 WITH THE GENERAL SERVICES ADMINISTRATION WAS VOID AB INITIO SO AS TO RELIEVE IT OF ANY OBLIGATION FOR EXCESS REPROCUREMENT AND LIQUIDATED DAMAGES COSTS RESULTING FROM TERMINATION OF THE CONTRACT FOR DEFAULT. CWC CLAIMS THAT THE CONTRACT WAS VOID BECAUSE IT WAS MISLED BY AMBIGUOUS SPECIFICATIONS AND THEREBY MADE A MISTAKE IN ITS PROPOSAL THAT SHOULD HAVE BEEN RECOGNIZED AS SUCH BY THE CONTRACTING OFFICER.

B-177944, JUN 6, 1974

REQUEST FOR RELIEF FROM DEFAULTED CONTRACT ON BASIS THAT CONTRACT WAS VOID AB INITIO IS DENIED SINCE SOLICITATION PROVIDING FOR OFFERS AND AWARDS ON ITEM BASIS WAS NOT AMBIGUOUS AND CONTRACTING OFFICER WAS NOT ON NOTICE OF POSSIBLE MISTAKE IN OFFERED PRICE, NOTWITHSTANDING SIGNIFICANT DIFFERENCE BETWEEN THAT PRICE AND ONLY OTHER OFFERED PRICE RECEIVED, SINCE OFFERED PRICE WAS WITHIN RANGE OF PRICES REGARDED AS COMMERCIALLY AVAILABLE.

TO COMPUTER WHOLESALE CORP.:

THE COMPUTER WHOLESALE CORPORATION (CWC) HAS REQUESTED THIS OFFICE TO DECLARE THAT CONTRACT NO. GS-00S-10916 WITH THE GENERAL SERVICES ADMINISTRATION WAS VOID AB INITIO SO AS TO RELIEVE IT OF ANY OBLIGATION FOR EXCESS REPROCUREMENT AND LIQUIDATED DAMAGES COSTS RESULTING FROM TERMINATION OF THE CONTRACT FOR DEFAULT.

THE SUBJECT CONTRACT, AWARDED TO CWC ON FEBRUARY 15, 1972, IN THE AMOUNT OF $43,365, CALLED FOR DELIVERY AND INSTALLATION OF TWO IBM 2803 MODEL 2 TAPE CONTROLS, ONE WITH SPECIAL FEATURES 7135, 3228 AND 4703 AND THE OTHER WITH SPECIAL FEATURES 3228 AND 4703, ALL PERIPHERAL AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE) TO BE ASSEMBLED WITH A GOVERNMENT-OWNED IBM 360/50 SYSTEM. CWC CLAIMS THAT THE CONTRACT WAS VOID BECAUSE IT WAS MISLED BY AMBIGUOUS SPECIFICATIONS AND THEREBY MADE A MISTAKE IN ITS PROPOSAL THAT SHOULD HAVE BEEN RECOGNIZED AS SUCH BY THE CONTRACTING OFFICER.

THE REQUEST FOR PROPOSALS SOLICITED OFFERS IN ANY OF FOUR WAYS: (1) LEASE ONLY, (2) LEASE WITH OPTION TO PURCHASE, (3) PURCHASE ONLY, OR (4) ANY COMBINATION OF THOSE THREE, AND INFORMED OFFERORS THAT THE GOVERNMENT WOULD MAKE AWARD ON AN ITEM BY ITEM BASIS TO THE FIRMS SUBMITTING THE LOWEST OVERALL COST FOR A 60-MONTH PERIOD. CWC SUBMITTED A TIMELY PROPOSAL, OFFERING TO SUPPLY, ON A PURCHASE ONLY BASIS, ITEMS 2 THROUGH 8 OF SCHEDULE A. SUBSEQUENT TO RECEIPT OF PROPOSALS, SEVERAL COMMUNICATIONS WERE EXCHANGED BETWEEN THE CONTRACTING OFFICER AND CWC AND ON JANUARY 18, 1972, CWC, AS REQUESTED, SUBMITTED CERTAIN REQUISITE MAINTENANCE PRICES ON ALL ITEMS TO BE USED IN FINAL EVALUATION OF ITS OFFER. ON FEBRUARY 15, 1972, CWC WAS ADVISED ORALLY THAT AWARD WAS MADE TO IT FOR ITEM 6. GSA CONFIRMED THE AWARD IN WRITING THE FOLLOWING DAY. ON FEBRUARY 17, 1972, CWC ADVISED THE CONTRACTING OFFICER THAT THE TWO TAPE CONTROLS OFFERED WERE READY FOR SHIPMENT BUT THAT NEITHER UNIT WAS EQUIPPED WITH FEATURE 7135. THE CONTRACTING OFFICER ADVISED THAT ONE OF THE UNITS REQUIRED THE 7135 FEATURE AND THAT CWC HAD BEEN PREVIOUSLY INFORMED OF THAT REQUIREMENT. BY TELEGRAM DATED FEBRUARY 22, 1972, CWC ADVISED THAT IT "DID NOT INTEND TO DELIVER IBM 2803 MODEL 2 TAPE CONTROLLERS WITH SPECIAL FEATURES NUMBER 7135-3228-4703. WE CANNOT DELIVER A 2803-2 WITH THESE FEATURES AND CANNOT ACCEPT AWARD OR PURCHASE ORDER EXCEPT FOR 2803 MODEL 2 WITH NO SPECIAL FEATURES. WE ARE SORRY FOR THIS UNINTENTIONAL MISUNDERSTANDING."

THEREAFTER, ON MARCH 9, 1972, THE CONTRACT WAS TERMINATED FOR DEFAULT, IN ACCORDANCE WITH PARAGRAPH 11(A)(I) OF THE GENERAL PROVISIONS OF STANDARD FORM 32, WHICH WAS INCORPORATED BY REFERENCE INTO THE CONTRACT. THE SUBJECT 2803S, WITH THE REQUIRED FEATURES, WERE THEN PURCHASED AGAINST CWC'S ACCOUNT WITH ASSESSED EXCESS COSTS OF $12,574 AND LIQUIDATED DAMAGES IN THE AMOUNT OF $16,400, FOR A TOTAL OF $28,974. CWC APPEALED THE DEFAULT TERMINATION TO THE GSA BOARD OF CONTRACT APPEALS, BUT SUBSEQUENTLY FILED A MOTION TO DISMISS WITHOUT PREJUDICE TO ITS RIGHTS TO REINSTATE THE APPEAL SO THAT THIS OFFICE COULD DETERMINE WHETHER A VALID CONTRACT HAD BEEN CREATED BY GSA'S AWARD ACTION. THE MOTION WAS GRANTED.

CWC CONTENDS THAT NO CONTRACT CAME INTO EXISTENCE BECAUSE THE SOLICITATION CONTAINED AN AMBIGUITY WITH RESPECT TO WHETHER PRICE PROPOSALS ON "EACH INDIVIDUAL UNIT" WERE PERMISSIBLE AND WHETHER THE CONTRACTOR HAD TO OFFER TO FURNISH "THE TOTAL QUANTITY OF EACH INDIVIDUAL UNIT SHOWN." CWC STATES THAT BECAUSE OF THIS AMBIGUITY, ITS PROPOSAL WAS ALSO NECESSARILY AMBIGUOUS BECAUSE IT COULD HAVE BEEN INTERPRETED TO MEAN THAT CWC WAS OFFERING TO FURNISH ANY OF SEVERAL COMBINATIONS OF UNIT FEATURES UNDER ITEM 6.

THE RFP LISTED SEVERAL ITEMS IN THE SCHEDULES. ITEM 6 OF SCHEDULE A WAS LISTED AS FOLLOWS:

"ITEM NO. MODEL NO. DESCRIPTION QUANTITY

6 2803-2 TAPE CONTROL 2 EA.

FC 7135 1 EA.

FC 3228 2 EA.

FC 4703 2 EA."

IT IS CWC'S CLAIM THAT THE RFP DID NOT CLEARLY INDICATE THAT A PRICE SUBMITTED FOR ITEM 6 WOULD BE REGARDED AS AN OFFER TO SUPPLY ALL THE EQUIPMENT AND FEATURES LISTED, IN THE QUANTITIES SPECIFIED, UNDER THAT ITEM NUMBER. WE DO NOT AGREE.

THE "METHOD OF AWARD" PROVISION ON PAGE 12 OF THE RFP STATED THAT "THE GOVERNMENT WILL AWARD TO THE BIDDERS) WHO OFFERS) THE LOWEST COST, ITEM-BY -ITEM OR 'ALL OR NONE BASIS' ***." FURTHERMORE, PARAGRAPH 10 OF STANDARD FORM 33A, WHICH WAS INCORPORATED BY REFERENCE, PROVIDED:

"(C) THE GOVERNMENT MAY ACCEPT ANY ITEM OR GROUP OF ITEMS OF ANY OFFER, UNLESS THE OFFEROR QUALIFIES HIS OFFER BY SPECIFIC LIMITATIONS. UNLESS OTHERWISE PROVIDED IN THE SCHEDULE, OFFERS MAY BE SUBMITTED FOR ANY QUANTITIES LESS THAN THOSE SPECIFIED: AND THE GOVERNMENT RESERVES THE RIGHT TO MAKE AN AWARD ON ANY ITEM FOR A QUANTITY LESS THAN THE QUANTITY OFFERED AT THE UNIT PRICES OFFERED UNLESS THE OFFEROR SPECIFIES OTHERWISE IN HIS OFFER."

WE THINK THESE TWO PROVISIONS MADE IT CLEAR THAT WHILE THE GOVERNMENT INTENDED TO MAKE AWARD ON AN ITEM-BY-ITEM BASIS UNLESS IT WOULD BE MORE ADVANTAGEOUS TO ACCEPT AN "ALL OR NONE" TYPE OFFER, OFFERS COULD BE SUBMITTED AND AWARDS MADE FOR EACH ITEM FOR QUANTITIES LESS THAN THOSE SPECIFIED IN THE SCHEDULE. WE FURTHER BELIEVE THAT IT IS REASONABLY CLEAR FROM THE SOLICITATION ITSELF THAT THE REFERENCES IN THESE PROVISIONS TO "ITEM" REFER TO THE TOTAL SYSTEMS OR UNITS OF EQUIPMENT IDENTIFIED AS A NUMERICAL ITEM IN THE SCHEDULE. THIS VIEW IS REINFORCED BY THE LANGUAGE ON PAGE 11 OF THE RFP, WHICH REFERS TO "THE SYSTEMS OR ITEMS" TO BE PROCURED, AND BY THE LANGUAGE IN BLOCK 21 OF STANDARD FORM 33, WHICH PROVIDED FOR AWARD "AS TO ITEMS NUMBERED." THEREFORE, WE BELIEVE THAT UNDER THIS SOLICITATION THE GOVERNMENT'S ACCEPTANCE OF AN OFFER TO FURNISH AN ITEM LISTED IN THE SCHEDULE WOULD OBLIGATE THE OFFEROR TO FURNISH EVERYTHING ENCOMPASSED BY THAT ITEM UNLESS THE OFFER CONTAINED A SPECIFIC INDICATION THAT THE OFFER WAS BASED ON FURNISHING SOMETHING LESS.

HERE, CWC'S PROPOSAL CONTAINED NO QUALIFYING LANGUAGE OR OTHER INDICATION THAT IT WAS OFFERING TO FURNISH ONLY THE TAPE CONTROLS WITHOUT THE REQUIRED FEATURES. CWC DOES ASSERT THAT BECAUSE IT WAS CAREFUL TO WRITE ITS OFFER PRICE OF $20,000 EACH "ON ONLY THE LINE OCCUPIED BY '2803-2 TAPE CONTROL - 2 EA,'" IT DID MAKE CLEAR THAT ITS OFFER WAS FOR ONLY THE 2 TAPE CONTROLS. HOWEVER, THE SAME LINE ALSO CONTAINED THE "6" WHICH IDENTIFIED THE ENTIRE SCHEDULE ITEM, SO THAT A PRICE ON THAT LINE WOULD NOT, BY ITSELF, BE AN INDICATION TO THE CONTRACTING OFFICER THAT THE PRICE WAS NOT FOR ALL OF ITEM 6. FURTHERMORE, GSA POINTS OUT THAT "AS A MATTER OF PRACTICE, THIRD PARTY EQUIPMENT IS QUITE OFTEN PRICED AS A TOTAL UNIT, IRRESPECTIVE OF ITS ASSOCIATED SPECIAL FEATURES ***. THE FACT THAT CWC DID NOT FURNISH ANY PRICES ON THE LINES ON WHICH THE FEATURES APPEAR IS INCONCLUSIVE TO THEIR ARGUMENT *** SINCE *** SOME FEATURES CAME WITH THE EQUIPMENT AT NO ADDITIONAL CHARGE." ACCORDINGLY, WE ARE OF THE VIEW THAT NEITHER THE SOLICITATION NOR CWC'S OFFER WAS AMBIGUOUS AND THAT THE CONTRACTING OFFICER PROPERLY VIEWED THE OFFER AS ONE FOR SUPPLYING EVERYTHING INCLUDED IN ITEM 6.

CWC FURTHER CONTENDS THAT IF ITS OFFER WAS REGARDED AS ONE TO FURNISH ALL THE EQUIPMENT AND SPECIAL FEATURES OF ITEM 6, THEN THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE THAT THERE WAS AN ERROR IN CWC'S PROPOSAL BECAUSE CWC'S PRICE WAS "GROSSLY LOWER" THAN THE NEXT LOWEST PRICE. CWC ALSO STATES THAT ITS PROPOSAL PRICE OF $20,000 EACH SHOULD HAVE CAUSED THE CONTRACTING OFFICER TO SUSPECT A MISTAKE BECAUSE SPECIAL FEATURE 7135, WHICH WAS TO BE FURNISHED WITH ONE OF THE TAPE CONTROLS, WAS ALONE WORTH MORE THAN $14,000.

AS A GENERAL RULE A CONTRACTOR'S CLAIM FOR RELIEF WILL NOT BE GRANTED IN THE CASE OF A UNILATERAL MISTAKE AFTER AN OFFER HAS BEEN ACCEPTED BY THE GOVERNMENT UNLESS THE CIRCUMSTANCES ARE SUCH THAT THE GOVERNMENT HAD OR SHOULD HAVE HAD NOTICE OF THE PROBABILITY OF MISTAKE PRIOR TO ACCEPTANCE OF THE OFFER. 45 COMP. GEN. 305 (1965); B-179765, NOVEMBER 15, 1973; CHERNICK V. UNITED STATES, 178 CT. CL. 498 (1967). IN MANY CASES A SIGNIFICANT DIFFERENCE BETWEEN AN OFFERED PRICE AND OTHER OFFERED PRICES OR THE GOVERNMENT'S COST ESTIMATE WILL CHARGE THE CONTRACTING OFFICER WITH NOTICE OF THE POSSIBILITY OF A MISTAKE. C. N. MONROE MANUFACTURING COMPANY V. UNITED STATES, 143 F. SUPP. 449 (E.D. MICH 1956); 48 COMP. GEN. 672 (1969). HERE, CWC'S TOTAL OFFER PRICE FOR ITEM 6 (INCLUDING CERTAIN MAINTENANCE CHARGES) WAS $43,363.04; THE ONLY OTHER OFFER RECEIVED ON A PURCHASE BASIS FOR ITEM 6 WAS FOR $58,256.40 (ON AN "ALL OR NONE" BASIS WITH ITEMS 7 AND 8). WHILE A CONTRACTING OFFICER MIGHT WELL BE REGARDED AS ON NOTICE OF A POSSIBLE MISTAKE BY SUCH A DIFFERENCE BETWEEN TWO OFFERED PRICES, SEE 53 COMP. GEN. 30 (B-178059, JULY 17, 1973), WE DO NOT BELIEVE THAT THE CONTRACTING OFFICER WAS OR SHOULD HAVE BEEN ON NOTICE OF A POSSIBLE ERROR IN CWC'S OFFER UNDER THE REPORTED CIRCUMSTANCES OF THIS CASE.

FIRST OF ALL, THIS WAS A NEGOTIATED, RATHER THAN A FORMALLY ADVERTISED PROCUREMENT, AND ALTHOUGH CWC DENIES IT, GSA REPORTS THAT ITS NEGOTIATOR, DURING DISCUSSIONS HELD WITH CWC PRIOR TO CONTRACT AWARD, INFORMED CWC "THAT ALL FEATURE CODES WERE MANDATORY REQUIREMENTS." GSA FURTHER REPORTS THAT THROUGHOUT THE DISCUSSIONS, WHICH TOOK PLACE OVER A PERIOD OF APPROXIMATELY A MONTH, CWC GAVE NO INDICATION THAT ITS OFFER WAS EXCLUSIVE OF THE SPECIAL FEATURES WHICH THE CONTRACTING OFFICER VIEWED AS EXPLICITLY REQUIRED BY THE RFP. SECONDLY, GSA REPORTS THAT IT IS COMMON FOR USED EQUIPMENT TO BE FURNISHED IN RESPONSE TO THIS TYPE OF SOLICITATION, AND CWC'S PRICE WAS NOT OUT OF LINE WITH THE THIRD PARTY MARKET PRICES AVAILABLE FOR USED EQUIPMENT. IN THIS REGARD, GSA, ON THE BASIS OF INDUSTRY NEWSLETTERS INDICATING THAT SUCH EQUIPMENT WAS AVAILABLE FOR 50- 55 PERCENT OFF NEW EQUIPMENT PRICES, REPORTS THAT DISCOUNTED SELLING PRICES OF $40,995 AND $36,895 FOR THE TOTAL ITEM 6 REQUIREMENT WERE REGARDED AS COMMERCIALLY AVAILABLE. WITH RESPECT TO CWC'S ASSERTION THAT ITS PRICE OF $20,000 EACH SHOULD HAVE RAISED THE SPECTRE OF MISTAKE BECAUSE ONE BUT NOT BOTH TAPE CONTROLS WAS TO HAVE AN ADDED FEATURE WORTH $14,000, THE RECORD SHOWS $14,390 AS THE NEW PRICE FOR FEATURE 7135. THE BASIS OF THE THIRD PARTY MARKET USED PRICES, HOWEVER, THE COST OF ONE TAPE CONTROL WITH FEATURE 7135 (ALONG WITH FEATURES 3228 AND 4703) PLUS THE COSTS OF A SECOND TAPE CONTROL WITHOUT THAT FEATURE, WOULD, AS INDICATED ABOVE, BE IN THE $37,000 - $41,000 RANGE. WHILE THE TAPE CONTROL TO BE FURNISHED WITH FEATURE 7135 OBVIOUSLY WOULD HAVE TO COST MORE THAN THE OTHER TAPE CONTROL, WE NOTE THAT CWC, ON ALL ITEMS ON WHICH IT SUBMITTED AN OFFER, INDICATED ITS PRICES ON A UNIT ("EA.") BASIS. THUS, WE THINK IT WAS REASONABLE FOR THE CONTRACTING OFFICER TO VIEW CWC'S PRICE OF $20,000 EACH TO BE AN EXPRESSION OF AVERAGE UNIT TAPE CONTROL COST REPRESENTING A TOTAL OFFERED PRICE OF $40,000 FOR ALL OF ITEM 6.

FINALLY, CWC QUESTIONS WHY, IF ITS PRICE WAS IN LINE WITH OTHERS AVAILABLE, IT WAS ASSESSED EXCESS COSTS OF $12,574. THE RECORD SHOWS THAT GSA REPROCURED THE EQUIPMENT FROM TWO DIFFERENT VENDORS AT A TOTAL COST OF $52,574. OUR CONCLUSIONS, HOWEVER, ARE BASED ON THE SHOWING IN THE RECORD THAT CWC'S PRICE WAS IN LINE WITH PRICES INDICATED BY COMMERCIAL LITERATURE TO BE AVAILABLE IN THE MARKET PLACE FOR THE SAME EQUIPMENT. QUESTIONS CONCERNING THE REPROCUREMENT AND EXCESS COSTS ARE NOT BEFORE US FOR CONSIDERATION IN THIS CASE, BUT ARE PROPERLY MATTERS FOR THE BOARD OF CONTRACT APPEALS UPON REINSTATEMENT OF THE CASE IN THAT FORUM.

ALTHOUGH WE DO NOT QUESTION CWC'S ASSERTION THAT IT INTENDED TO OFFER ONLY THE TAPE CONTROLS WITHOUT THE FEATURES, WE MUST CONCLUDE, BASED ON THE FOREGOING, THAT THIS INTENT WAS NOT AND SHOULD NOT HAVE BEEN APPARENT TO THE CONTRACTING OFFICER AND THAT UPON ACCEPTANCE BY THE GOVERNMENT OF CWC'S OFFER, A VALID AND BINDING CONTRACT CAME INTO EXISTENCE AGAINST WHICH CWC'S RIGHTS AND OBLIGATIONS MUST BE MEASURED.