B-181872, NOV 5, 1974

B-181872: Nov 5, 1974

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CONTRACTING OFFICER WAS ON NOTICE OF MISTAKE IN BID. 000 WAS FROM ROBERT E. IT WAS INFORMED BY ON OF ITS SUBCONTRACTORS. THE ERROR WAS ALLEGED TO HAVE RESULTED FROM INLAND'S USE OF PRICES FOR 20 GAUGE STEEL INSTEAD OF THE MORE EXPENSIVE 18-GAUGE STEEL REQUIRED BY THE IFB. INLAND INFORMED MCKEE THAT INLAND WOULD HONOR ITS BID PRICE AND AT THE SAME TIME REQUESTED MCKEE'S ASSISTANCE IN ATTEMPTING TO HAVE THE ERROR CORRECTED. MCKEE STATED: "WE WISH TO MAKE CLEAR THAT WE ARE NOT CLAIMING THAT THE ABOVE DESCRIBED OCCURRENCES CONSTITUTED ANY MISTAKE BY US AND ACCORDINGLY WE DO NOT WISH THE AWARD OF THE SUBJECT CONTRACT TO US TO BE DELAYED IN ANY WAY IN VIEW OF PREVALENT CONTINUING ESCALATIONS OF PRICES OF LABOR AND MATERIALS.

B-181872, NOV 5, 1974

WHERE BIDDER ALERTS CONTACTING OFFICER THAT ITS SUBCONTRACTOR HAS ALLEGED MISTAKE IN ITS QUOTATION WHILE CLEARLY ASSERTING NO MISTAKE IN ITS BID, AND REQUESTS CONTRACT AT BID PRICE, CONTRACTING OFFICER WAS ON NOTICE OF MISTAKE IN BID, AND REQUEST FOR CORRECTION MAY BE GRANTED SINCE WORKSHEETS

PRESENT CLEAR AND CONVINCING EVIDENCE OF NATURE OF ERROR, HOW IT OCCURRED AND INTENDED BID.

ROBERT E. MCKEE, INC.:

ON APRIL 24, 1974, THE VETERANS ADMINISTRATION OPENED BIDS FOR CONSTRUCTION OF A HOSPITAL AT LOMA LINDA, CALIFORNIA. THE LOW BID OF $14,820,000 WAS FROM ROBERT E. MCKEE, INC. (MCKEE). THE OTHER BIDS RANGED FROM $15,550,000 TO $16,522,000.

MCKEE STATES THAT ON APRIL 26, 1974, IT WAS INFORMED BY ON OF ITS SUBCONTRACTORS, INLAND-RYERSON CONSTRUCTION PRODUCTS COMPANY (INLAND), THAT IT HAD MADE AN ERROR OF APPROXIMATELY $105,000 IN ITS QUOTE. THE ERROR WAS ALLEGED TO HAVE RESULTED FROM INLAND'S USE OF PRICES FOR 20 GAUGE STEEL INSTEAD OF THE MORE EXPENSIVE 18-GAUGE STEEL REQUIRED BY THE IFB. IN A LETTER DATED MAY 3, 1974, INLAND INFORMED MCKEE THAT INLAND WOULD HONOR ITS BID PRICE AND AT THE SAME TIME REQUESTED MCKEE'S ASSISTANCE IN ATTEMPTING TO HAVE THE ERROR CORRECTED.

BY LETTER OF MAY 3, 1974, PRIOR TO AWARD OF THE CONTRACT, MCKEE STATED:

"WE WISH TO MAKE CLEAR THAT WE ARE NOT CLAIMING THAT THE ABOVE DESCRIBED OCCURRENCES CONSTITUTED ANY MISTAKE BY US AND ACCORDINGLY WE DO NOT WISH THE AWARD OF THE SUBJECT CONTRACT TO US TO BE DELAYED IN ANY WAY IN VIEW OF PREVALENT CONTINUING ESCALATIONS OF PRICES OF LABOR AND MATERIALS. MERELY WISH TO NOTIFY YOU THAT WE WILL BE COOPERATING THE INLAND-RYERSON CONSTRUCTION PRODUCTS COMPANY IN SEEKING RELIEF FOR THEIR MISTAKE, AFTER THE AWARD OF THE CONTRACT TO US."

MCKEE SOUGHT AN INCREASE OF $105,000 FOR THE SUBCONTRACTOR, PLUS A PROFIT OF 3.5 PERCENT, OR $3,675, FOR A TOTAL INCREASE OF $108,675. THIS WOULD NOT HAVE CHANGED MCKEE'S STANDING AS LOW BIDDER. THE CONTRACTING OFFICER HAS RECOMMENDED THE REQUEST FOR ADJUSTMENT BE GRANTED ON EQUITABLE CONSIDERATIONS SINCE THE GOVERNMENT IS RECEIVING 18-GAUGE DECKING AT LOWER 20-GAUGE PRICES. THE DIRECTOR, SUPPLY SERVICE, RECOMMENDS THAT THE CONTRACT BE ADJUSTED TO CORRECT THE $105,000 MISTAKE, BUT RECOMMENDS THAT THE 3.5 PERCENT PROFIT FACTOR BE DISALLOWED. RELIANCE FOR THIS POSITION IS BASED UPON 49 COMP. GEN. 446 (1970).

WE AGREE WITH THE ADMINISTRATIVE RECOMMENDATION THAT THE CONTRACT MAY BE REFORMED. GENERALLY, ACCEPTANCE OF A BID BY THE GOVERNMENT WITH ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF AN ERROR IN THE BID DOES NOT CREATE A BINDING CONTRACT. 52 COMP. GEN. 837 (1973); 45 COMP. GEN 208 (1966). IN THIS CASE, THE MISTAKE WAS BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER BEFORE AWARD WAS MADE. MCKEE, AT THAT TIME, COULD HAVE HAD ITS CLAIM OF MISTAKE PROCESSED IN ACCORDANCE WITH THE PROCEDURES SET OUT IN FEDERAL PROCUREMENT REGULATION 1-2.406, ET SEQ., CONCERNING MISTAKES IN BID. NOTWITHSTANDING, MCKEE CHOSE TO ACCEPT THE AWARD AT ITS BID PRICE, WHILE AT THE SAME TIME PRESERVING ITS RIGHT TO HAVE THE ERROR REVIEWED. SEE 49 COMP. GEN. 446, 449 (1970). WHILE THIS ERROR WAS COMMITTED BY A SUBCONTRACTOR, UNLIKE 49 COMP. GEN. 446, SUPRA, WE HAVE HELD THAT THE FACT THAT THE MISTAKE IN BID IS FOUNDED IN ERRONEOUS QUOTATIONS FROM SUPPLIERS IS NOT A BAR TO RELIEF. B-169901, JUNE 19, 1970, AND DECISIONS CITED THEREIN. SINCE MCKEE'S BID WAS PREDICATED UPON ITS SUPPLIER'S ERRONEOUS BID (INLAND), IT IS REASONABLE TO ASSUME THAT MCKEE'S BID WOULD HAVE REFLECTED INLAND'S INTENDED BID, AS WELL.

IN OUR REVIEW OF THE DOCUMENTATION SUBMITTED BY MCKEE ON BEHALF OF INLAND, WE DISCOVERED VARIOUS ARITHMETICAL ERRORS IN INLAND'S COMPUTATION OF ITS INTENDED BID. FIRST, IN COMPUTING ITS MARKUP BY A 30-PERCENT FACTOR BASED UPON ITS INITIAL COST EXTENSION OF $361,111, IT MISTAKENLY ARRIVED AT $472,666, INSTEAD OF $469,444, OR AN ERROR OF $3,223. WE NOTE ALSO THAT ANOTHER ERROR NOT SPECIFICALLY MENTIONED WAS CORRECTED FROM ITS ORIGINAL BID TO ITS INTENDED BID. IN APPLYING ITS ESCALATION, INLAND FAILED TO INCLUDE A FACTOR OF $3.75 PER HUNDRED WEIGHT AS SUBJECT TO ITS 10-PERCENT INCREASE ON MATERIALS ATTRIBUTABLE TO 1975. ALSO, A $7.00 ERROR WAS COMMITTED IN ITS TAX COMPUTATION. INLAND MULTIPLIED $.79 TIMES 19,718 FOR A TOTAL OF $15,570, RATHER THATN $15,577. BASED ON OUR COMPUTATIONS, INLAND'S INTENDED BID WAS $767,306, OR AN INCREASE OF $101,784 OVER ITS MISTAKEN BID.

THE CONTRACTING OFFICER ALSO RECOMMENDS GRANTING MCKEE A 3.5-PERCENT PROFIT ON THE INCREASE GENERATED BY INLAND'S MISTAKE. HOWEVER, MCKEE HAS SUBMITTED NO DOCUMENTATION THAT WOULD SUBSTANTIATE ITS CLAIM FOR A 3.5- PERCENT PROFIT. RATHER, THE FIGURE WAS COMMUNICATED TO THE CONTRACTING OFFICER BY TELEPHONE AS THE GENERAL RATE IT APPLIED TO THE ENTIRE PROJECT. WE HAVE RECOGNIZED AND GRANTED SUCH REQUESTS UPON THE PROPER SHOWING OF EVIDENCE THAT WOULD CLEARLY AND CONVINCINGLY DEMONSTRATE THAT WAS MCKEE'S INTENDED PRACTICE. MATTER OF FINAST METAL PRODUCTS, INC., B- 179915, MAY 3, 1974. OUR OFFICE WOULD NOT OBJECT TO THE GRANT OF SUCH RELIEF ($3,562.44) UPON THE PRESENTATION OF APPROPRIATE DOCUMENTATION BY MCKEE.