B-233041, Feb 6, 1989, 68 Comp.Gen. 232

B-233041: Feb 6, 1989

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Procurement - Bidding - Low bids - Error correction - Price adjustments Propriety Low bid was properly corrected to include amount omitted due to an extension error in calculating home office overhead where clear and convincing evidence established both the existence of the mistake and the amount the bidder actually intended to include in its bid calculations for the overhead. The bid will remain low by approximately 12.6 percent. Lash contends that there was insufficient evidence of the intended bid price to permit correction. 435 was low. The government estimate was $3. The formula for calculating home office overhead is set forth as "10% x 3.7 million. " but the extension of the calculation is stated to be only $37.

B-233041, Feb 6, 1989, 68 Comp.Gen. 232

Procurement - Bidding - Low bids - Error correction - Price adjustments Propriety Low bid was properly corrected to include amount omitted due to an extension error in calculating home office overhead where clear and convincing evidence established both the existence of the mistake and the amount the bidder actually intended to include in its bid calculations for the overhead, and the bid will remain low by approximately 12.6 percent.

Lash Corporation:

Lash Corporation protests the determination by the United States Coast Guard to permit upward correction of the low bid submitted by Construction and Rigging, Inc. (CRI), in response to invitation for bids No. DTCG50-88- B-65023, for repair of a fuel pier at the Coast Guard Support Center in Kodiak, Alaska. Lash contends that there was insufficient evidence of the intended bid price to permit correction. Lash requests that the award to CRI be terminated and award made to Lash.

We deny the protest.

The Coast Guard received five bids at bid opening on August 11, 1988. CRI's bid of $3,484,435 was low; Lash submitted the second low bid of $4,369,750. The government estimate was $3,457,190. Shortly after bid opening, the contracting officer, suspecting a mistake in CRI's bid, requested the firm to review its worksheets and verify its bid. On August 15, CRI advised the agency that it had in fact made an extension mistake in calculating the amount of "home office overhead" (the cost of running its corporate offices) to include in its bid price. In the original worksheets CRI submitted to the agency as evidence of the mistake, the formula for calculating home office overhead is set forth as "10% x 3.7 million," but the extension of the calculation is stated to be only $37,000, that is, $333,000 less than the product when multiplied correctly, $370,000. In a sworn statement, CRI's chief estimator declared that he intended to include $370,000 in CRI's bid for home office overhead based upon an initial estimate that the final bid price would total approximately $3,700,000; although CRI subsequently reduced its bid price through several last-minute adjustments (as shown on the firm's worksheets), CRI has explained that it did not intend to reduce the allowance for home office overhead. CRI further claimed that an additional $43,523 should be added to its profit, $2,870 to its allowance for bond costs, and $1,000 to its allowance for liability insurance, to reflect the $333,000 increase in the base upon which these costs were calculated. CRI therefore requested an increase in its bid of $380,393, for a new total bid of $3,864,828, that is, $504,922 (approximately 11.6 percent) less than the second low bid.

After reviewing CRI's worksheets and the sworn statement of the chief estimator (who was responsible for preparing the bid), the Coast Guard determined that CRI had submitted clear and convincing evidence that a mistake had been made and that the firm had in fact intended a bid of $3,864,828. In reaching this conclusion, the agency took into consideration not only the evidence submitted by CRI and the fact that the corrected price would still be substantially less than the second low bid, but also the agency's own opinion that it was unreasonable to believe that a firm would include only 1 percent for overhead, which usually is 10 percent or more.

Lash, which has not been provided with a copy of CRI's workpapers, argues that there appears to be insufficient evidence of the intended bid to permit correction. /1/

ANALYSIS

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; see 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.

Overhead

Our examination of CRI's workpapers and the affidavits furnished by the firm provides no basis to question the Coast Guard's determination that CRI submitted clear and convincing evidence that it intended to include in its bid calculations an allowance of $370,000 for home office overhead, calculated as 10 percent of its initial estimate of $3.7 million, as set forth in its worksheets. Although CRI's overall proposed bid for the project was subsequently adjusted several times, ranging from the $3,484,435 actually bid to $3,762,433, the overall allowance in the worksheets for indirect costs, which included home office overhead, did not vary, thus confirming CRI's claim that it did not intend to adjust its home office allowance to reflect subsequent adjustments in its overall bid. The addition of $333,000 for home office overhead will still leave CRI's price 12.6 percent below the next low bid.

Bid Schedule

In its request for correction, CRI also advised the agency of an inconsistency in its bid schedule. Specifically, although the extensions of CRI's unit prices for the five subitems under item 3 (furnish 4,100 feet of steel piling, install 3,320 feet of steel piling, etc.) are arithmetically correct, the stated total ($1,682,235) of the extended prices as entered on the bid schedule is $83,000 more than the correct total of these subitems ($1,599,235). The stated total bid price ($3,484,435) for all five bid items, however, is based on the lower total for the subitems, and CRI claims that this stated total price (plus the additional overhead, profit, bonds and insurance claimed) was its intended bid price.

Lash argues that the $83,000 discrepancy between the correct total of the item 3 subitems and the item 3 total actually entered on the schedule calls into question the bid actually intended by CRI and, at the least, requires the agency to reduce any correction with respect to the understated overhead by $83,000.

We disagree. We find the Coast Guard reasonably determined that CRI intended to bid $1,599,235 not $1,682,235. Not only is this amount for item 3 the proper total of the extended subitem prices and consistent with the total bid but, in addition, it is supported by the entries on the worksheets. In this regard, the stated $1,682,235 total for item 3 is shown on the worksheets as being intended prior to the reduction of one of the subitem prices by $83,000; the $1,599,235 total is entered on the worksheets as the intended item 3 price after this reduction. It thus appears that this reduced item 3 total simply was not carried over to item 3 in the bid, although it was reflected in the total bid price. Further, we consider it significant that CRI's explanation results in the lower of the two possible prices.

CONCLUSION

For the reasons set forth above, we deny Lash's protest against the correction of CRI's bid to include the additional $333,000 for home office overhead and to reflect the intended item 3 total. Since CRI's bid as properly corrected remains low, the award was proper.

We point out, however, that there appears to be insufficient evidence to include in the correction of CRI's bid the claimed $47,393 for profit, bond cost and insurance cost related to an increase in CRI's corrected base bid. We find no evidence in CRI's worksheets to corroborate CRI's assertion that the allowances for these items were based upon incremental formulas; no such formulas were set forth in the worksheets. Further, although CRI's overall proposed bid was adjusted several times (from $3,484,435 to $3,763,433), the allowances for these items either remained the same through all of the adjustments (in the case of profit and insurance), or were not adjusted using the claimed formula (in the case of bonds).

Accordingly, by separate letter to the Secretary of Transportation, we are recommending that CRI's contract price be modified to eliminate the unsubstantiated amount of $47,393.

The protest is denied.

/1/ Lash contends that the agency should have released the documents upon which the determination to permit correction was made. The Coast Guard withheld CRI's workpapers from the protester, however, on the basis that they contained proprietary information. The Competition in Contracting Act of 1984, 31 U.S.C Sec. 3553 (f) (Supp. IV 1986), does not require the disclosure of a firm's proprietary information. See generally Varian Assos., Inc.-- Request for Reconsideration, B-229921.6, Sept. 27, 1988, 88-2 CPD Para. 291. We note, however, that our Office examined all evidence relied upon by the agency in determining to permit correction.