B-182639, DEC 16, 1974

B-182639: Dec 16, 1974

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178 BID ON SURPLUS SALE ITEM WAS MISTAKE. MAY HAVE CONTRACT RESCINDED. WIDE RANGE OF BID PRICES IN SURPLUS SALE IS NOT DEEMED SUFFICIENT TO PUT CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF MISTAKE. BID WAS 2.7 TIMES NEXT HIGH BID. PROPERTY WAS USED. CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF POSSIBILITY OF ERROR. TO HAVE BEEN MADE IN HIS BID UPON WHICH SALE CONTRACT 27-5016-342 IS BASED. WHICH WAS DESCRIBED AS FOLLOWS: "RESIDUE. INSIDE - UNPACKED - USED - POOR CONDITION - REPAIRS REQUIRED TOTAL COST $7782 9900 POUND" WE ARE ADVISED BY DPDS THAT THE ABOVE PROPERTY CONSISTS OF THE RESIDUE OF RADIO TRANSMITTERS WHICH HAVE BEEN SUBSTANTIALLY STRIPPED OF THEIR MORE VALUABLE COMPONENTS.

B-182639, DEC 16, 1974

BIDDER, WHO ALLEGES THAT $2,178 BID ON SURPLUS SALE ITEM WAS MISTAKE, MAY HAVE CONTRACT RESCINDED. ORDINARILY, WIDE RANGE OF BID PRICES IN SURPLUS SALE IS NOT DEEMED SUFFICIENT TO PUT CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF MISTAKE. HOWEVER, BID WAS 2.7 TIMES NEXT HIGH BID, ALMOST 2.2 TIMES CURRENT MARKET APPRAISAL; PROPERTY WAS USED, IN POOR CONDITION REQUIRING MAJOR REPAIRS COSTING 41 PERCENT TO 65 PERCENT OF STANDARD PRICE, AND CONSIDERING THE HIGH RATE OF RETURN AGAINST THE ACQUISITION COST FOR PROPERTY WHICH BORDERED ON SCRAP, CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF POSSIBILITY OF ERROR.

MICHAEL VITAL, SR.:

BY LETTER DATED NOVEMBER 7, 1974, WITH ENCLOSURES, THE ASSISTANT COUNSEL, DEFENSE SUPPLY AGENCY (DSA), REQUESTED A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY MR. MICHAEL VITAL, SR., TO HAVE BEEN MADE IN HIS BID UPON WHICH SALE CONTRACT 27-5016-342 IS BASED.

THE DEFENSE PROPERTY DISPOSAL SERVICE (DPDS), BY INVITATION FOR BIDS 27- 5016, SOLICITED BIDS FOR SOME 380 ITEMS OF DEPARTMENT OF DEFENSE SURPLUS PERSONAL PROPERTY. MICHAEL VITAL, SR., SUBMITTED A TIMELY BID ON A NUMBER OF THE ITEMS, INCLUDING ITEM 186, WHICH WAS DESCRIBED AS FOLLOWS:

"RESIDUE, RADIO-TRANSMITTER SET: TYPE AN/TRC-1, INCLUDING RECEIVER, TYPE R-19/TRC-1; TRANSMITTER, TYPE T-14/TRC-1; MAST SECTIONS, GROUND STAKES, METAL AND WOOD CASES, GUY LINES, CARRYING BAGS, FRAMES, HAMMERS, CABLES AND DIPOLE ELEMENTS. INSIDE - UNPACKED - USED - POOR CONDITION - REPAIRS REQUIRED

TOTAL COST $7782 9900 POUND"

WE ARE ADVISED BY DPDS THAT THE ABOVE PROPERTY CONSISTS OF THE RESIDUE OF RADIO TRANSMITTERS WHICH HAVE BEEN SUBSTANTIALLY STRIPPED OF THEIR MORE VALUABLE COMPONENTS.

MR. VITAL'S UNIT BID FOR ITEM 186 WAS $0.22 PER POUND EXTENDED TO $2,178 AND WAS THE HIGH BID RECEIVED FOR THAT ITEM. AWARD OF ITEM 186 TO MR. VITAL WAS MADE ON AUGUST 6, 1974. BY LETTER DATED AUGUST 9, 1974, MR. VITAL ALLEGED THAT HE HAD MADE AN ERROR IN HIS BID ON ITEM 186 AND THAT IT SHOULD HAVE BEEN $0.022 PER POUND WHICH EXTENDS TO $217.80. WORK SHEETS WERE FORWARDED TO DPDS WHICH REFLECTED AN INTENDED ENTRY OF $0.022 FOR ITEM 186. A REQUEST FOR RESCISSION OF THE CONTRACT MAY BE INFERRED FROM MR. VITAL'S LETTER TO DPDS.

RESCISSION OF THE CONTRACT CAN ONLY BE ALLOWED IF THE CONTRACTING OFFICER HAD ACTUAL OR CONSTRUCTIVE NOTICE THAT MR. VITAL HAD MADE A MISTAKE IN HIS BID. ORDINARILY A WIDE RANGE OF BID PRICES IN SURPLUS PROPERTY SALES IS NOT DEEMED TO BE SUFFICIENT TO PUT THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE PROPERTY MAY BE PUT. WENDER PRESSES INC. V. UNITED STATES, 343 F. 2D 961 (CT. CL. 1965).

HOWEVER, IN THE PRESENT CASE, MR. VITAL'S BID ON ITEM 186 WAS MORE THAN 2.7 TIMES THE NEXT HIGH BID IN THE AMOUNT OF $792 AND 2.2 TIMES THE CURRENT MARKET VALUE OF $990. IN ADDITION, AS POINTED OUT BY COUNSEL FOR DPDS, IT IS APPARENT FROM THE ITEM DESCRIPTION THAT IT IS UNLIKELY THAT SIGNIFICANT PARTS RECOVERY COULD BE EFFECTED FROM THE PROPERTY IN QUESTION. IN THIS CONNECTION, PROPERTY WHICH IS DESCRIBED AS USED AND IN POOR CONDITION WITH REPAIRS REQUIRED IS DEFINED BY THE DEFENSE DISPOSAL MANUAL (DOD 4160.21 - M) AS:

"USED PROPERTY, IN POOR CONDITION AND REQUIRING MAJOR REPAIRS. BADLY WORN, AND WOULD STILL BE IN DOUBTFUL CONDITION OF DEPENDABILITY AND UNECONOMICAL TO USE IF REPAIRED. ESTIMATED REPAIR COSTS FROM 41% TO 65% OF STATNDARD PRICE."

UNDER THE ABOVE CIRCUMSTANCES, AND AS COUNSEL FURTHER POINTS OUT, PARTICULARLY CONSIDERING THE HIGH RATE OF RETURN (27 PERCENT) AGAINST THE ACQUISITION COST FOR PROPERTY WHICH BORDERS ON BEING SCRAP, WE BELIEVE THAT THE SALES CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF A MISTAKE IN MR. VITAL'S BID.

ACCORDINGLY, WE AGREE WITH THE ADMINISTRATIVE RECOMMENDATION THAT THE CONTRACT BE RESCINDED WITHOUT LIABILITY TO MR. VITAL.