Request for Opinion Regarding Contract Reformation

The Veterans Administration requested an opinion regarding reformation of a contract because of a mistake in the bid discovered after the award of the contract. The contractor allegedly underestimated its costs for labor, benefits, taxes, and insurance. The contractor was awarded the contract after bidding $51,822; the next lowest bid was $98,105.17. Because of the large disparity in the bids and an inconclusive government estimate on the probable cost of the project, the contracting officer sought and received verification of the bid before making the award. Four days after the notice of award was mailed, the contractor asserted that it had discovered an error in its bid. Sole responsibility for preparation of a bid generally rests with the bidder, and where the bidder makes an error it must bear the consequences of its error unless the error is mutual or the contracting officer was on actual or constructive notice of the error prior to award. Where there is reason to believe that a mistake may have been made, the contracting officer is required to request verification of the bid, apprising the bidder of the mistake which is suspected and the basis for such suspicion. Acceptance of a bid verified in this manner results in a valid and binding contract. Since the contracting officer sought verification of the bid in this manner, GAO determined that there was no legal basis to reform the contract.