B-182084, DEC 4, 1974

B-182084: Dec 4, 1974

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BIDDER WHO ALLEGED MISTAKE IN FAILING TO INCLUDE A PRICE ESCALATION CLAUSE IN BID WHICH WOULD HAVE ESTABLISHED PRICE TO BE CHARGED GOVERNMENT AS THAT IN EFFECT AT TIME OF SHIPMENT. MAY HAVE CONTRACT CANCELED WITHOUT LIABILITY BECAUSE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE AS TO POSSIBILITY OF ERROR AND SHOULD HAVE REQUESTED VERIFICATION. SINCE ONLY OTHER RESPONSIVE BID WAS MORE THAN 50 PERCENT HIGHER THAN LOW BID. ONLY TWO WERE DETERMINED TO BE RESPONSIVE TO THE TERMS AND CONDITIONS OF THE SOLICITATION. WAS AWARDED THE CONTRACT. THE ONLY OTHER RESPONSIVE BID RECEIVED WAS FOR $3. RALPH DAVID STATED THAT DUE TO AN ERROR IN THE PREPARATION OF ITS BID THE FIRM FAILED TO INCLUDE A PRICE ESCALATION CLAUSE WHICH IN ESSENCE WOULD HAVE STATED THAT THE BILLING PRICE WOULD BE THE PRICE IN EFFECT AT TIME OF SHIPMENT.

B-182084, DEC 4, 1974

BIDDER WHO ALLEGED MISTAKE IN FAILING TO INCLUDE A PRICE ESCALATION CLAUSE IN BID WHICH WOULD HAVE ESTABLISHED PRICE TO BE CHARGED GOVERNMENT AS THAT IN EFFECT AT TIME OF SHIPMENT, MAY HAVE CONTRACT CANCELED WITHOUT LIABILITY BECAUSE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE AS TO POSSIBILITY OF ERROR AND SHOULD HAVE REQUESTED VERIFICATION, SINCE ONLY OTHER RESPONSIVE BID WAS MORE THAN 50 PERCENT HIGHER THAN LOW BID. SEE 53 COMP. GEN. 30 (1973).

RALPH DAVID, INCORPORATED:

THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, VETERANS ADMINISTRATION (VA), REQUESTED OUR DECISION CONCERNING THE REQUEST OF RALPH DAVID, INCORPORATED (RALPH DAVID) TO BE RELIEVED FROM THE OBLIGATION TO PERFORM UNDER CONTRACT NO. 610-3066, AWARDED BY THE VETERANS ADMINISTRATION HOSPITAL, MARION, INDIANA.

THE INVITATION FOR BIDS (NO. 610-32-74) WHICH PRECEDED THE CONTRACT SOLICITED FIRM FIXED-PRICE BIDS FOR THE SUPPLY OF TWELVE ELECTRICAL POWER LOOP SWITCHES. OF THE FOUR BIDS RECEIVED, ONLY TWO WERE DETERMINED TO BE RESPONSIVE TO THE TERMS AND CONDITIONS OF THE SOLICITATION. RALPH DAVID OFFERED TO SUPPLY THE SWITCHES AT A PRICE OF $2,241.85 PER UNIT AND, AS THE LOW RESPONSIVE BIDDER, WAS AWARDED THE CONTRACT. THE ONLY OTHER RESPONSIVE BID RECEIVED WAS FOR $3,537.00 PER UNIT.

HOWEVER, AFTER AWARD, RALPH DAVID REQUESTED THAT THE SUBJECT CONTRACT BE CANCELED ON THE BASIS OF AN ALLEGED MISTAKE IN THE SUBMISSION OF ITS BID. RALPH DAVID STATED THAT DUE TO AN ERROR IN THE PREPARATION OF ITS BID THE FIRM FAILED TO INCLUDE A PRICE ESCALATION CLAUSE WHICH IN ESSENCE WOULD HAVE STATED THAT THE BILLING PRICE WOULD BE THE PRICE IN EFFECT AT TIME OF SHIPMENT. THE CONTRACTOR ALLEGES THAT IT WILL INCUR A LOSS OF ABOUT $2,000 IF IT PERFORMS THE CONTRACT AT ITS BID PRICE BECAUSE ITS MANUFACTURER'S PRICE HAS INCREASED APPROXIMATELY 10 PERCENT SINCE THE CONTRACT WAS AWARDED.

THE MANUFACTURER'S QUOTATION TO THE BIDDER CONTAINED THE QUALIFICATION THAT PRICES WOULD BE THOSE IN EFFECT AT TIME OF SHIPMENT. HOWEVER, THE CONTRACTING OFFICER ASSERTS THAT AT THE TIME OF AWARD, IT WAS NOT APPARENT FROM THE FACE OF THE BID THAT A MISTAKE HAD BEEN MADE BY ANY BIDDER AND THAT THE CONTRACTING OFFICER WAS NOT ON ACTUAL NOTICE AS TO ANY POSSIBLE ERROR IN RALPH DAVID'S BID UNTIL HE WAS CONTACTED AFTER AWARD. NEVERTHELESS, THE CONTRACTING OFFICER HAS RECOMMENDED THAT THE CONTRACTOR BE ALLOWED TO CORRECT HIS BID AND RESULTING CONTRACT TO INCLUDE THE ESCALATION CLAUSE PROVIDED THAT ANY RESULTING INCREASE IN PRICE SHALL NOT EXCEED 10 PERCENT OF THE TOTAL AMOUNT OF THE ORDER.

THE RESPONSIBILITY FOR THE PREPARATION OF A BID IS UPON THE BIDDER. GENERALLY, IF A BIDDER HAS MADE A MISTAKE IN THE SUBMISSION OF A BID, THE MISTAKE WAS NEITHER INDUCED NOR SHARED BY THE GOVERNMENT, AND A CONTRACT HAS BEEN AWARDED ON THE BASIS OF THE BID, THE BIDDER MUST BEAR THE CONSEQUENCES OF HIS MSTAKE UNLESS THE GOVERNMENT WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF A MISTAKE PRIOR TO AWARD. MATTER OF THE MURPHY ELEVATOR CO., INC., B-180607, APRIL 2, 1974. WHERE THE GOVERNMENT WAS OR SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF MISTAKE, ACCEPTANCE BY THE CONTRACTING OFFICER DOES NOT RESULT IN A BINDING AND ENFORCEABLE CONTRACT AND OUR OFFICE WILL ALLOW APPROPRIATE RELIEF. B-173824, NOVEMBER 18, 1971. CONSTRUCTIVE NOTICE IS SAID TO EXIST WHEN THE CONTRACTING OFFICER, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF A CASE, SHOULD HAVE KNOWN OF THE POSSIBILITY OF AN ERROR IN THE BID. 44 COMP. GEN. 383, 386 (1965). RECENTLY, OUR OFFICE RECONSIDERED ITS PREVIOUS DECISIONS IN REGARD TO THE CONCEPT OF CONSTRUCTIVE NOTICE AND DETERMINED THAT WHERE A CONTRACTING OFFICER RECEIVES ONLY TWO WIDELY VARIANT BIDS, A BASIS FOR COMPARISON EXISTS SO AS TO PUT THE CONTRACTING OFFICER ON NOTICE OF THE POSSIBILITY OF MISTAKE. 53 COMP. GEN. 30 (1973). IN THAT CASE, OUR OFFICE CONCLUDED THAT A 70- PERCENT DIFFERENCE IN PRICE BETWEEN THE CONTRACTOR'S BID AND THE ONLY OTHER BID RECEIVED, STANDING ALONE, WAS SUFFICIENT TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF A MISTAKE IN THE CONTRACTOR'S BID AND THAT A VALID AND BINDING CONTRACT WAS NOT CONSUMMATED BY ACCEPTANCE OF THE UNVERIFIED BID.

BASED ON THE RECORD BEFORE OUR OFFICE, IT MAY BE CONCLUDED THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF AN ERROR IN THE BID OF RALPH DAVID BECAUSE OF THE VARIANCE OF MORE THAN 50 PERCENT BETWEEN THAT BID AND THE ONLY OTHER RESPONSIVE BID RECEIVED. SEE, MATTER OF NATIONAL CHINA AND EQUIPMENT CORP., B-180386, FEBRUARY 4, 1974; MATTER OF EDERER, INC., B-180993, MAY 29, 1974. CONSEQUENTLY, THE CONTRACTING OFFICER SHOULD HAVE REQUESTED VERIFICATION OF RALPH DAVID'S BID BEFORE ACCEPTANCE. 53 COMP. GEN. 30, SUPRA. HAD HE DONE SO, IT IS REASONABLE TO CONCLUDE THAT HE WOULD HAVE HAD ACTUAL KNOWLEDGE OF RALPH DAVID'S MISTAKE IN FAILING TO INCLUDE THE ESCALATION CLAUSE.

ACCORDINGLY, ACCEPTANCE OF THE BID IN THESE CIRCUMSTANCES DID NOT CONSTITUTE A VALID AND BINDING AGREEMENT AND PURCASE ORDER NO. 610-3066 SHOULD BE CANCELED WITHOUT LIABILITY TO RALPH DAVID.