B-230559, Jun 14, 1988, 88-1 CPD 571

B-230559: Jun 14, 1988

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The IFB is for the construction of a fire fighting training school at the Naval Technical Training Center. 000 was low. The next lowest bid was Dickman-Nourse's. The government estimate was $8. 000 shown but mistakenly added as if it were $50. An adding machine tape showing the mistaken calculation. continental also noted that the subtotal that included the mistaken profit figure was thereafter relied on in its summary worksheet to calculate the cost of required bonds and builder's risk insurance. Arguing that the Navy should have allowed upward correction of its bid price by $450. Since evidence of Continental's clerical error and of its intended bid was clear and convincing. Was $9.

B-230559, Jun 14, 1988, 88-1 CPD 571

PROCUREMENT - Sealed Bidding - Bids - Clerical errors - Error correction - Propriety DIGEST: Where workpapers contain clear and convincing evidence that the low bidder mistakenly calculated its profit margin, and the intended bid may be ascertained by taking into account the error and its mathematically calculable effects on bond and insurance premium costs, the bid may be corrected upward to reflect the revised profit calculation since the corrected bid would remain low by a substantial amount.

Continental Heller Corporation:

Continental Heller Corporation protests the determination by the Department of the Navy to deny Continental's request to correct a mistake in its low bid, and to award a contract to Dickman-Nourse, Inc., under invitation for bids (IFB) No. N62474-85-B-5272. The IFB is for the construction of a fire fighting training school at the Naval Technical Training Center, Treasure Island, California.

We sustain the protest.

The Navy received seven bids on January 21, 1988. Continental's bid of $8,775,000 was low. The next lowest bid was Dickman-Nourse's, $930,O00 more than Continental's at $9,698,000. The government estimate was $8,230,000. On January 26, before award, Continental advised the Navy that it had made a mistake in its bid, adding $50,000 for profit rather than $500,000. To support its claim, Continental submitted a bid estimate summary worksheet, with the correct profit figure of $50,000 shown but mistakenly added as if it were $50,000; a project fee analysis prepared in order to determine the profit margin with a 5.25 percent margin calculated as $500,000; an affidavit from the Executive Vice President of continental attesting to the fact that a clerical error had been made; and an adding machine tape showing the mistaken calculation. continental also noted that the subtotal that included the mistaken profit figure was thereafter relied on in its summary worksheet to calculate the cost of required bonds and builder's risk insurance. Continental requested permission of the Navy to increase its bid price by $45O,000 (the amount of the calculation error) to $9,225,0O0 (a figure that did not reflect the increased cost of bonds and insurance), leaving Continental the low bidder by $473,000.

The Navy determined, after comparing Continental's bid with other bids and the government estimate, that Continental had submitted clear and convincing evidence that a mistake had been made, but had failed to submit clear and convincing evidence as to its intended bid. By letter of February 24, the Navy therefore refused Continental's request to correct the bid and informed the firm that it could either withdraw the bid without penalty or accept award at the amount of its original bid. Continental protested the Navy's decision to our Office on February 29, arguing that the Navy should have allowed upward correction of its bid price by $450,0O0 plus applicable bond and insurance premium costs, suitably rounded off, since evidence of Continental's clerical error and of its intended bid was clear and convincing. By letter of March 23, Continental provided additional information concerning the effect of its mistake on bond and insurance premium costs, stating that its intended bid, taking the clerical error and its effect on those other costs into account, was $9,232,000.

The Navy argues that Continental has failed to present clear and convincing evidence of its intended bid since it has presented three different intended bids: $9,225,000 in its January 26 letter to the Navy; $9,225,000 plus insurance and bond costs in its protest letter to our Office, and $9,232,000 in its March 23 letter. In addition, the Navy questions five other entries on Continental's summary sheet unrelated to Continental's specific mistake claim: a $40,000 downward adjustment labeled a "fee," two subcontractor downward cost adjustments for electrical and roofing work totaling $243,900, a subcontractor addition of $10,000 for electrical work, and an unlabeled $15,900 upward adjustment.

On April 21, while Continental's protest was pending, the Navy determined that urgent and compelling circumstances would not permit awaiting our decision, and on April 27 the agency therefore awarded a contract to Dickman-Nourse, the next low bidder. On May 9, Continental filed a civil action (No. C88-1744-AZ) in the United States District Court for the Northern District of California, seeking declaratory and injunctive relief. By order dated May 11, the court issued a temporary restraining order and requested that our Office continue processing Continental's protest. The court denied Continental's motion for a preliminary injunction on May 31.

An agency may permit upward correction of a low bid before award, to an amount that still is less than the next low bid, where clear and convincing evidence establishes both the existence of a mistake and the bid actually intended. Federal Acquisition Regulation (FAR) Sec. 14.406-3 (FAC 84-12); Fortec Constructors, B-203190.2, Sept. 29, 1981, 81-2 CPD Para. 264. Whether the evidence meets the clear and convincing standard is a question of fact, and we will not question an agency's decision based on this evidence unless it lacks a reasonable basis. Fortec Constructors, B-203190.2, supra. In this respect, in considering upward correction of a low bid worksheets may constitute clear and convincing evidence if they are in good order and indicate the intended bid price and there is no contravening evidence. Montgomery Construction Co., Inc., B-221317, Feb. 28, 1986, 86-1 CPD Para. 210. In addition, where the mistake has a specifically calculable effect on the bid calculation and that effect can be determined by a formula evident from the worksheets, the intended bid may be ascertained by taking into account the effects of the error on other bid calculations based on the mistaken entry. Amtech Elevator Services, B-216067, Jan. 11, 1985, 85-1 CPD Para. 31.

Further, where an intended bid cannot be determined exactly, correction may be proper provided there is clear and convincing evidence that the intended bid would remain low in any event. Western States Construction Co., Inc., B-191209, Aug. 29, 1978, 78-2 CPD Para. 149. The sufficiency of the evidence of the bid actually intended should be determined by reviewing the closeness of the corrected bid and the next low bid, and the range of uncertainty, if any, in the intended bid. The closer an asserted intended bid is to the next low bid, the more difficult it is to establish that it was the bid actually intended. Crimson Enterprises, Inc., B-213239, May 8, 1984, 84-1 CPD Para. 513.

Our review of the worksheets, project fee analysis and adding machine tapes submitted by Continental confirms the fact that Continental made an error in adding $50,000 instead of $500,000 for profit in its bid calculations. Moreover, it is clear from the worksheets that Continental's $450,000 error had an effect on the calculation of the cost of bonds, builder's risk insurance and liability insurance. The mathematical formulae that Continental used to calculate the cost of the bonds and insurance per $1,000 of the bid price are found on the worksheets themselves, and, therefore, the effect of Continental's addition error on the cost. of bonds and insurance-- an additional 87,000 -- is ascertainable from the worksheets. Consequently, Continental's mistake and its intended bid, 89,232,00O, are established by the necessary clear and convincing evidence. Although Continental originally asked the Navy to correct its bid to 89,225,000, the firm noted that the mistaken profit figure was relied on to calculate the cost of bonds and insurance, and the firm's subsequent submissions to our Office and the Navy substantiates that assertion. We thus do not agree with the Navy that Continental's three submissions present three different intended bids.

Moreover, even if Continental's intended bid submissions did vary by 87,000, if the bid were corrected to 89,232,000 it still would be $466,000 lower than the next lowest bid, a margin of nearly 6 percent. See Sam Gonzales, Inc., B-216728, Feb. 1, 1985, 85-1 CPD Para. 125.

The Navy further argues that five other entries on Continental's bid summary worksheet preclude correction of Continental's bid because Continental has not given adequate explanations for these adjustments in its original bid, and has not indicated why these adjustments were not changed by the calculation error. As a result, the Navy asserts that Continental has not proven what its intended bid would have been by clear and convincing evidence.

We find that the five adjustments, totaling a net reduction of $268,000 in Continental's original bid price, do not relate to the addition error in Continental's profit margin, and do not affect the recalculation of its intended bid. Of the two entries dealing with last-minute subcontractor costs, the $250,000 downward adjustment labeled "Elect" concerns the firm's decision to change to a lower priced electrical subcontractor than the one included on its cumulative subcontractor's quote sheet, and the $10,000 upward adjustment labeled "Elect" reflects the correction of a transcription error regarding that reduction. The $3,900 reduction involves a last-minute change in a roofing subcontractor's previous quote that had been included in the firm's cumulative subcontractor quote sheet. These items relate to changes in anticipated subcontractor costs and were not decisions that were affected by Continental's profit margin addition error. Moreover, Continental did not request that these reductions be eliminated in its corrected bid and the firm has submitted clear and convincing evidence to substantiate the last-minute subcontractor adjustments: its cumulative subcontractors' quote sheet; its electrical sub-bid analysis spreadsheet, its individual electrical "up- down" sheet; and the telephone quote sheets from the two lowest electrical subcontractors and the roofing subcontractor.

We also find that the two other entries on Continental's bid summary sheet questioned by the Navy do not preclude correction of Continental's bid. The $4O,OO0 reduction labeled a "Fee" and the $15,900 addition to the final bid price do not relate to Continental's mistaken profit calculation and result in a net negative $24,100, a de minimis amount in relation to Continental's uncorrected bid of $8,775,000. Moreover, Continental has explained the $40,000 reduction as related to the unexpected significant reduction in cumulative estimated subcontractor costs, rather than its overall profit margin, and has not requested that this reduction be eliminated in its corrected bid. The firm has also indicated that the $15,900 addition was a rounding off of the final bid price.

Thus, even if these alleged discrepancies were relevant to Continental's intended bid price, the effect on that price would be negligible, and would not preclude correction where the failure to correctly calculate the firm's profit in the bid price has been established by clear and convincing evidence and the range of uncertainty as to the intended bid is small as compared to the difference between the corrected bid and the next low bid, as is the case here. Avanti Construction Corp., B-229839, Mar. 14, 1988, 88-1 CPD Para. 262,; Western Alaska Contractors, B-220067, Jan. 22, 1986, 86-1 CPD Para. 66.

We understand from the Navy that construction has not yet begun; thus, it does not appear to be impracticable at this time to terminate Dickman- Nourse's contract for the convenience of the government. We therefore recommend such termination and the award of a contract to Continental at a corrected bid price of $9,232,000, if otherwise appropriate.

The protest is sustained.