B-181878, AUG 6, 1974

B-181878: Aug 6, 1974

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SINCE MISTAKE HAS BEEN ADEQUATELY ESTABLISHED BY EVIDENCE SUBMITTED AND CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF ERROR IN LOW BID BECAUSE AVERAGE OF 12 BIDS RECEIVED WAS APPROXIMATELY 127 PERCENT HIGHER THAN LOW BID AND NEXT LOW BID APPROXIMATELY 59 PERCENT HIGHER. THE CONTRACT WAS AWARDED ON MAY 13. AMERICAN STATED THAT ITS BID WAS COMPUTED ON THE BASIS OF A QUOTATION OF $844 PER TRAY FROM ITS SUPPLIER. THE ABSTRACT OF BIDS SHOWS THAT THE NEXT LOW BID WAS APPROXIMATELY 59 PERCENT HIGHER THAN AMERICAN'S AND THE AVERAGE OF THE 12 BIDS RECEIVED IS APPROXIMATELY 127 PERCENT HIGHER THAN AMERICAN'S UNIT PRICE. THE CONTRACTING OFFICER STATES THAT HE SHOULD HAVE BEEN ON NOTICE OF THE ERROR IN AMERICAN'S BID AND RECOMMENDS RESCISSION OF THE CONTRACT.

B-181878, AUG 6, 1974

SINCE MISTAKE HAS BEEN ADEQUATELY ESTABLISHED BY EVIDENCE SUBMITTED AND CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF ERROR IN LOW BID BECAUSE AVERAGE OF 12 BIDS RECEIVED WAS APPROXIMATELY 127 PERCENT HIGHER THAN LOW BID AND NEXT LOW BID APPROXIMATELY 59 PERCENT HIGHER, CONTRACT TO LOW BIDDER MAY BE RESCINDED WITHOUT LIABILITY.

VETERANS ADMINISTRATION REQUEST FOR DECISION CONCERNING A MISTAKE IN BID ALLEGED BY AMERICAN FOOD SERVICES EQUIPMENT, INC.

THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, VETERANS ADMINISTRATION (VA), REQUESTS OUR DECISION PURSUANT TO FEDERAL PROCUREMENT REGULATIONS 1-2.406-4(I) AS TO THE PROPRIETY OF THE PROPOSED RESCISSION OF VA CONTRACT NO. 671-8628 WITH AMERICAN FOOD SERVICE EQUIPMENT, INC. (AMERICAN), OF CHESTER, VIRGINIA. THE CONTRACT WAS AWARDED ON MAY 13, 1974, FOR SIX FOOD SERVICE TRAYS AT A TOTAL PRICE OF $1,939.26, BASED ON A UNIT PRICE OF $323.21.

BY LETTER OF MAY 24, 1974, AMERICAN REQUESTED RESCISSION OF THE CONTRACT BECAUSE OF AN ALLEGED MISTAKE IN ITS BID. AMERICAN STATED THAT ITS BID WAS COMPUTED ON THE BASIS OF A QUOTATION OF $844 PER TRAY FROM ITS SUPPLIER, MINUS AMERICAN'S 33-1/3 PERCENT DISCOUNT. AMERICAN THEN DETERMINED THE DOLLAR AMOUNT OF THE DISCOUNT (33-1/3 PERCENT MULTIPLIED BY $844) TO BE $281.33 PER UNIT. INSTEAD OF SUBTRACTING $281.33 FROM $844 TO FIND THE DISCOUNTED PRICE, AMERICAN USED THE DISCOUNT OF $281.33 AS THE QUOTED PRICE FOR THE ITEM. AMERICAN THEN APPLIED FREIGHT COSTS AND ITS PROFIT FACTOR TO THE MISTAKEN QUOTED PRICE TO ARRIVE AT ITS BID OF $323.21 PER UNIT. USING THE CORRECT DISCOUNTED PRICE, AMERICAN'S BID WOULD BE $618.61 PER UNIT, OR $68.61 HIGHER THAN THE NEXT LOWEST UNIT BID OF $550 SUBMITTED BY LAKE STATE INDUSTRIES, INC.

THE ABSTRACT OF BIDS SHOWS THAT THE NEXT LOW BID WAS APPROXIMATELY 59 PERCENT HIGHER THAN AMERICAN'S AND THE AVERAGE OF THE 12 BIDS RECEIVED IS APPROXIMATELY 127 PERCENT HIGHER THAN AMERICAN'S UNIT PRICE.

THE CONTRACTING OFFICER STATES THAT HE SHOULD HAVE BEEN ON NOTICE OF THE ERROR IN AMERICAN'S BID AND RECOMMENDS RESCISSION OF THE CONTRACT.

IF A BIDDER MAKE A UNILATERAL ERROR IN BID, THE BIDDER IS BOUND BY THE AWARD UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE ERROR. IF THE CONTRACTING OFFICER WAS ACTUALLY OR CONSTRUCTIVELY ON NOTICE OF THE MISTAKE, THE CONTRACT MAY BE RESCINDED. 49 COMP. GEN. 199 (1969).

IN VIEW OF THE EVIDENCE SUBMITTED, WE CONCLUDE THAT THE ALLEGED MISTAKE HAS BEEN ADEQUATELY ESTABLISHED AND THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE MISTAKE PRIOR TO AWARD BECAUSE AMERICAN'S BID WAS SO OUT OF LINE WITH THE OTHER BIDS SUBMITTED. SEE B-180882, APRIL 25, 1974, AND CASES CITED THEREIN.

CONSEQUENTLY, GAO WILL NOT OBJECT TO THE PROPOSED RESCISSION OF THE CONTRACT WITHOUT LIABILITY TO AMERICAN.