B-183756, JUL 8, 1975

B-183756: Jul 8, 1975

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CONTRACTOR WHO ALLEGES TYPOGRAPHICAL ERROR IN NEGOTIATED SALES CONTRACT AFTER ALL CONTRACTUAL OBLIGATIONS HAVE BEEN DISCHARGED INCLUDING FINAL PAYMENT IS ENTITLED TO RELIEF BECAUSE NO VALID CONTRACT WAS CONSUMMATED AT OFFERED PRICE WHERE EVIDENCE INDICATES THAT OFFER WAS 3-1/2 TIMES GREATER THAN MINIMUM ACCEPTABLE PRICE AND CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF EXISTENCE OF ERROR BUT FAILED TO REQUEST VERIFICATION OF OFFER. HAS REQUESTED THAT OUR OFFICE CONCUR WITH ITS RECOMMENDATION THAT A CREDIT BE GRANTED TO UNITED MINERAL & CHEMICAL CORPORATION (UMC) IN CONNECTION WITH AN ERROR ALLEGED TO HAVE BEEN MADE IN ITS OFFER WHICH WAS THE BASIS OF GSA PROPERTY MANAGEMENT AND DISPOSAL SERVICE CONTRACT GS-00-DS-(S)-33108.

B-183756, JUL 8, 1975

CONTRACTOR WHO ALLEGES TYPOGRAPHICAL ERROR IN NEGOTIATED SALES CONTRACT AFTER ALL CONTRACTUAL OBLIGATIONS HAVE BEEN DISCHARGED INCLUDING FINAL PAYMENT IS ENTITLED TO RELIEF BECAUSE NO VALID CONTRACT WAS CONSUMMATED AT OFFERED PRICE WHERE EVIDENCE INDICATES THAT OFFER WAS 3-1/2 TIMES GREATER THAN MINIMUM ACCEPTABLE PRICE AND CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF EXISTENCE OF ERROR BUT FAILED TO REQUEST VERIFICATION OF OFFER.

UNITED MINERAL & CHEMICAL CORPORATION:

BY LETTER DATED APRIL 25, 1975, WITH ENCLOSURES, THE GENERAL COUNSEL, GENERAL SERVICES ADMINISTRATION (GSA), HAS REQUESTED THAT OUR OFFICE CONCUR WITH ITS RECOMMENDATION THAT A CREDIT BE GRANTED TO UNITED MINERAL & CHEMICAL CORPORATION (UMC) IN CONNECTION WITH AN ERROR ALLEGED TO HAVE BEEN MADE IN ITS OFFER WHICH WAS THE BASIS OF GSA PROPERTY MANAGEMENT AND DISPOSAL SERVICE CONTRACT GS-00-DS-(S)-33108.

ON JULY 19, 1972, SOLICITATION FOR OFFERS FOR MICA, NO. PMDS-MIN-181, WAS ISSUED WHICH PROVIDED FOR NEGOTIATED SALES OF MUSCOVITE MICA. ADDENDUM NO. 1, ISSUED NOVEMBER 10, 1972, PROVIDED THAT NO AWARD OF MICA WOULD BE MADE PRIOR TO DECEMBER 1, 1972. ON DECEMBER 1, 1972, UMC OFFERED TO PURCHASE MICA, CODE 3795, AT $1.40 PER POUND. NO OTHER OFFERS FOR THIS CODE WERE RECEIVED. THE OFFER WAS ACCEPTED AND THE PARTIES ENTERED INTO CONTRACT -33108 WHICH WAS EXECUTED BY THE GOVERNMENT ON JANUARY 8, 1973. THE CONTRACT HAS BEEN FULLY PERFORMED.

UMC ALLEGED THAT A TYPOGRAPHICAL ERROR WAS MADE IN ITS OFFER TO PURCHASE THE 24,031 POUNDS OF MICA, IN THAT ITS QUOTATION OF $1.40 PER POUND SHOULD HAVE BEEN $0.40 PER POUND AND THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE ALLEGED ERROR AND HENCE SHOULD HAVE REQUESTED VERIFICATION OF ITS OFFER.

THE ALLEGED ERROR WAS DISCOVERED IN DECEMBER 1974 BY AN ACCOUNTANT HIRED BY UMC. THE MISTAKE WAS DETECTED WHEN THE ACCOUNTANT DISCOVERED A PURCHASE OF THE SAME CODE BY UMC FROM THE LAGER COMMERCIAL CORPORATION (LAGER) WHICH HAD ORIGINALLY PURCHASED THIS MATERIAL FROM GSA PRIOR TO UMC'S PURCHASE AT A PRICE OF $0.62 PER POUND. IMMEDIATELY AFTER THE ERROR WAS DETECTED, UMC NOTIFIED GSA BY LETTERS DATED DECEMBER 26, 1974, AND JANUARY 9, 1975, OF ITS TYPOGRAPHICAL ERROR AND REQUESTED A CREDIT REPRESENTING THE DIFFERENCE BETWEEN THE PRICE PAID TO GSA AND THE PRICE PAID TO LAGER.

THE CONTRACTING OFFICER STATES THAT IN THE NEGOTIATION FOR PRICES FOR MICA SALES, GSA EMPLOYS CERTAIN PROCEDURES. A SEPARATE INVENTORY SHEET WHICH CONTAINS SALES CONTRACTS, QUANTITIES, PRICE AND THE MINIMUM ACCEPTABLE PRICE IS MAINTAINED FOR EACH CODE. WHEN AN OFFER IS RECEIVED THE PRICE IS CHECKED AGAINST THE INVENTORY SHEET TO DETERMINE WHETHER THE OFFER IS ACCEPTABLE. ACCORDING TO GOVERNMENT RECORDS AND ANALYSIS OF MARKET CONDITIONS AT THE TIME OF THE INITIAL SALE TO LAGER, THE MINIMUM ACCEPTABLE PRICE FOR CODE 3795 WAS $0.40 PER POUND. THE PRICE TO LAGER OF $0.62 PER POUND REPRESENTED THE MINIMUM ACCEPTABLE PRICE PLUS A $0.22 PREMIUM AS CONSIDERATION FOR A CONTRACT AMENDMENT.

AS A GENERAL RULE, NO RELIEF WILL BE GRANTED IN THE CASE OF A UNILATERAL MISTAKE AFTER THE BID OR OFFER HAS BEEN ACCEPTED IN GOOD FAITH BY THE GOVERNMENT UNLESS THE CIRCUMSTANCES ARE SUCH TO DICTATE THAT THE GOVERNMENT KNEW OR SHOULD HAVE KNOWN OF THE PROBABILITY OF THE MISTAKE, THUS NECESSITATING VERIFICATION OF THE OFFER BEFORE IT IS ACCEPTED. COMP. GEN. 305 (1965); B-176537, DECEMBER 21, 1972.

WHERE A BIDDER OR OFFEROR HAS MADE A MISTAKE IN ITS BID OR OFFER THAT WAS NOT INDUCED OR SHARED BY THE GOVERNMENT, THE BIDDER OR OFFEROR MUST BEAR THE CONSEQUENCES OF ITS MISTAKE, UNLESS THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. SALIGMAN V. UNITED STATES, 56 F. SUPP. 505 (E.D. PA. 1944); CHERNICK V. UNITED STATES, 372 F.2D 492 (CT. CL. 1967); 48 COMP. GEN. 672 (1969).

THE TEST IS ONE OF REASONABLENESS, WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE THERE WERE ANY FACTORS WHICH REASONABLY COULD HAVE RAISED THE PRESUMPTION OF ERROR IN THE MIND OF THE CONTRACTING OFFICER. WENDER PRESSES, INC. V. UNITED STATES, 343 F.2D 961 (CT. CL. 1965); D.G. MACHINERY & GAGE CO., B-181230, JANUARY 27, 1975.

WHILE, AS STATED ABOVE, UMC'S OFFER WAS THE ONLY ONE RECEIVED, SINCE THE OFFER WAS 3-1/2 TIMES GREATER THAN THE MINIMUM ACCEPTABLE PRICE, WE ARE OF THE VIEW THAT THERE WAS CLEAR AND CONVINCING EVIDENCE THAT A MISTAKE WAS MADE AND THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF PROBABILITY OF AN ERROR IN THE QUOTED PRICE AND SHOULD HAVE REQUESTED VERIFICATION OF UMC'S OFFER BEFORE IT WAS ACCEPTED.

OUR OFFICE HAS HELD THAT NO VALID AND BINDING CONTRACT IS CONSUMMATED WHERE THE CONTRACTING OFFICER KNEW OR SHOULD HAVE KNOWN OF THE PROBABILITY OF ERROR BUT NEGLECTED TO TAKE PROPER STEPS TO VERIFY. FRITZ A. NACHANT, INC., B-181028, JULY 11, 1974.

ACCORDINGLY, WE BELIEVE IT IS EVIDENT THAT NO CONTRACT WAS EVER EFFECTED AT THE AWARD PRICE. CHRIS BERG, INC. V. UNITED STATES, 426 F.2D 314 (CT. CL. 1970). BECAUSE ALL OBLIGATIONS ARISING UNDER THE CONTRACT HAVE BEEN DISCHARGED, RESCISSION IS NOT FEASIBLE. HOWEVER, WE BELIEVE THAT UMC IS ENTITLED TO THE MEASURE OF RELIEF AS RECOMMENDED BY GSA WHEREIN UMC WILL BE GRANTED A CREDIT OF THE DIFFERENCE BETWEEN ITS PRICE AND THE PRICE PAID BY LAGER.