B-183481, APR 21, 1975

B-183481, APR 21, 1975

SALES CONTRACT FOR SURPLUS PROPERTY MAY BE RESCINDED AND ANOTHER SALES CONTRACT MAY BE REFORMED BY DELETION OF ITEM FOR SIMILAR PROPERTY WITHOUT LIABILITY TO CONTRACTORS. CONTRACTING OFFICER DID NOT VERIFY BIDS ALTHOUGH ON CONSTRUCTIVE NOTICE OF POSSIBLE ERRORS IN BIDS PRIOR TO AWARDS BECAUSE OF DISPARITY BETWEEN SUCCESSFUL BIDS OF $3,570 AND $4,650 AND PAST SALES PRICES ON SAME PROPERTY OF $2,340 AND $1,021.99, RESPECTIVELY, AND UNCLEAR IFB STATEMENT OF PROPERTY LOCATION. AGENCY CONCLUSION THAT SAME PERSON WHO SUBMITTED BOTH SUCCESSFUL AND SECOND HIGH BIDS FOR BOTH CONTRACTS FOR DIFFERENT COMPANIES DID NOT VIOLATE CERTIFICATE OF INDEPENDENT PRICE DETERMINATION IS NOT QUESTIONED.

WIRE PROCESSING COMPANY:

ACME REFINING & SMELTING CO.:

THIS CASE INVOLVES A REQUEST BY THE DEFENSE SUPPLY AGENCY (DSA) FOR ADVANCE DECISIONS AS TO WHETHER TWO SALES CONTRACTS ENTERED INTO BY THE DEFENSE PROPERTY DISPOSAL SERVICE (DPDS) MAY BE RESCINDED WITHOUT LIABILITY TO THE CONTRACTORS.

BY INVITATION FOR BIDS (IFB) NO. 41-5001, THE DPDS, OGDEN, UTAH, OFFERED FOR SALE, AMONG OTHER ITEMS, TWO LOTS OF SCRAP COPPER INSULATED CABLE - ITEMS 114 AND 115. THE WIRE PROCESSING COMPANY (PROCESSING) SUBMITTED A BID OF $3,570 FOR ITEM 114. THE NEXT HIGH BID FOR THIS ITEM WAS $2,500, AND IT WAS SUBMITTED BY THE ACME REFINING & SMELTING CO. (ACME). BOTH OF THESE BIDS WERE SIGNED BY LOUIS A. BARON ON BEHALF OF THE TWO COMPANIES. THE PROCESSING BID WAS ACCEPTED FOR AWARD ON JULY 25, 1974. ON ITEM 115, ACME SUBMITTED A BID OF $4,650 WHILE PROCESSING WAS THE NEXT HIGH BIDDER AT $2,520. LOUIS A. BARON ALSO SIGNED THESE TWO BIDS FOR THE RESPECTIVE COMPANIES. ACME'S HIGH BID WAS ACCEPTED FOR AWARD ON JULY 25, 1974.

AFTER AWARD, PROCESSING AND ACME ADVISED DPDS THAT SIMILAR MISTAKES IN BIDDING ON THE TWO ITEMS HAD BEEN MADE AND REQUESTED RELEASE FROM THE CONTRACTS. MORE SPECIFICALLY, THE COMPANIES STATE THAT THEY WERE UNAWARE THAT THE CABLE WAS LOCATED IN ALASKA, AND POINTED TO THE PROPERTY LOCATION LISTED IN THE IFB - NAVAL STATION ADAK, FPO SEATTLE, WASHINGTON - WHICH DID NOT OTHERWISE IDENTIFY THE PROPERTY AS BEING LOCATED IN ALASKA.

BY LETTER DATED MARCH 19, 1975, TO OUR OFFICE, THE ACTING ASSISTANT COUNSEL, HEADQUARTERS, DSA, IN CONCURRENCE WITH THE DPDS, RECOMMENDED THE RESCISSION OF THE TWO SALES CONTRACTS NOS. 41-5001-192 AND 41-5001 114. THE DPDS ADMITS THAT THE LOCATION OF THE PROPERTY WAS NOT CLEARLY STATED IN THE IFB. ALSO, DPDS RELATES THE PRIOR SALES HISTORY OF THE ITEMS. THE CABLE OFFERED FOR SALE UNDER ITEM 114, UPON WHICH PROCESSING WAS THE SUCCESSFUL BIDDER, HAD PREVIOUSLY BEEN SOLD FOR $2,340, AND THE PREVIOUS PURCHASER HAD FAILED TO PERFORM. SIMILARLY, THE CABLE OFFERED FOR SALE UNDER ITEM 115, UPON WHICH ACME WAS THE SUCCESSFUL BIDDER, HAD PREVIOUSLY BEEN SOLD FOR $1,021.99, AND THE PREVIOUS PURCHASER HAD FAILED TO PERFORM. DPDS REFERS TO OUR RECOGNITION THAT WIDE PRICE VARIATIONS ARE UNUSUAL IN THE SALE OF SCRAP METALS BECAUSE OF THE ESTABLISHED MARKET AND LIMITED USES FOR THIS MATERIAL, CITING MATTER OF ACME REFINING-SMELTING COMPANY, B-181967, AUGUST 20, 1974.

DSA AND DPDS CONCLUDE THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF POSSIBLE MISTAKES IN THE BIDS PRIOR TO AWARDS BECAUSE OF THE SUBSTANTIAL DISPARITY BETWEEN THE SUCCESSFUL BIDS AND THE PAST SALES AT APPRECIABLY LOWER PRICES FOR THE IDENTICAL PROPERTY, WHICH RESULTED IN DEFAULT ACTIONS, AS WELL AS THE ADMITTEDLY UNCLEAR PROPERTY LOCATION IN THE IFB. IN THESE CIRCUMSTANCES, WE CONCUR WITH DSA AND DPDS THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE AND, THEREFORE, SHOULD HAVE ASKED PROCESSING AND ACME TO VERIFY THEIR BIDS PRIOR TO AWARDS. 49 COMP. GEN. 199 (1969).

IN RECOMMENDING RESCISSION OF THE TWO SALES CONTRACTS, DSA AND DPDS BRING TO OUR ATTENTION THE FOLLOWING MATTER. AS MENTIONED ABOVE, BOTH THE MISTAKEN HIGH BIDS AND THE SECOND HIGH BIDS ON ITEMS 114 AND 115 WERE SIGNED BY LOUIS A. BARON ON BEHALF OF THE TWO BIDDING FIRMS. BECAUSE THIS MULTIPLE BIDDING WAS PERFORMED IN POSSIBLE VIOLATION OF THE CERTIFICATE OF INDEPENDENT PRICE DETERMINATION CONTAINED IN THE IFB, THE DPDS REQUESTED A CLARIFYING STATEMENT FROM MR. BARON. FOLLOWING HIS EXPLANATION OF THE INDEPENDENT CORPORATE STRUCTURES OF PROCESSING AND ACME AND THAT THE MULTIPLE BIDS WERE SUBMITTED FOR LEGITIMATE BUSINESS REASONS, DPDS CONCLUDED THAT THERE WAS NO EVIDENCE OF ANY INTENT TO PREJUDICE EITHER THE UNITED STATES OR OTHER BIDDERS, CITING 51 COMP. GEN. 403 (1972). DSA'S ACTING ASSISTANT COUNSEL NOTED THAT, EVEN IF MR. BARON HAD ALLEGED HIS MISTAKE PRIOR TO AWARD AND REQUESTED WITHDRAWAL OF THE HIGH BIDS, HE WOULD NOT THEREBY HAVE OBTAINED A COMPETITIVE ADVANTAGE OVER OTHER BIDDERS. INASMUCH AS MR. BARON PREPARED BOTH BIDS, HIS MISTAKE AS TO THE PROPERTY'S LOCATION WOULD HAVE AFFECTED BOTH BIDS AND DSA COULD NOT HAVE MADE AWARDS TO THE NEXT HIGH BIDDERS AFTER WITHDRAWAL OF THE HIGH BIDS. WE SEE NO REASON TO QUESTION THIS CONCLUSION.

ACCORDINGLY, CONTRACT NO. 41-5001-114 FOR ITEM 115 MAY BE RESCINDED WITHOUT LIABILITY TO ACME. WITH RESPECT TO CONTRACT NO. 41-5001-192, WE NOTE THAT, WHILE DSA AND DPDS RECOMMEND RESCISSION, THE CONTRACT COVERED THE AWARD NOT ONLY OF ITEM 114 BUT OF ANOTHER ITEM (077) NOT ENCOMPASSED BY THE REQUEST FOR RELIEF BY PROCESSING. THEREFORE, CONTRACT NO. 41-5001- 192 MAY BE REFORMED BY DELETION OF ITEM 114 ONLY WITHOUT LIABILITY TO THE CONTRACTOR.