B-130984, MAY 2, 1957

B-130984, MAY 2, 1957

TO TRAND PLASTICS COMPANY:

REFERENCE IS MADE TO YOUR ATTORNEYS' LETTER DATED MARCH 4, 1957, WITH ENCLOSURES, REQUESTING RESCISSION OF CONTRACT NO. DA-11-009-QM 25330 ON THE GROUND OF MUTUAL MISTAKE, ON THE BASIS OF THE OPINION IN ARMED SERVICES BOARD OF CONTRACT APPEALS NO. 3708, ENTITLED "APPEAL OF TRAND PLASTICS COMPANY, A PARTNERSHIP.'

IN RESPONSE TO INVITATION NO. QM-11-009-56-233, DATED JANUARY 9, 1956, THERE WAS SUBMITTED IN YOUR NAME A BID IN THE TOTAL AMOUNT OF $37,627.28 TO FURNISH 573,000 UNITS OF MESS TRAY LINERS FULFILLING MILITARY SPECIFICATION MIL-L-1074B/QMC), DATED 2 NOVEMBER 1954. THE UNIT PRICES THEREFOR VARIED FROM $0.06445 TO $0.06964 DEPENDING UPON THE VARIOUS NAMED DESTINATION DEPOTS.

THE OPINION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS STATES AS FOLLOWS:

"IN REVIEWING THE PRICES QUOTED BY APPELLANT THE STAFF OF THE CONTRACTING OFFICER DISCOVERED THAT APPELLANT'S BID WAS 29 PERCENT LOWER THAN A PRIOR PROCUREMENT IN DECEMBER 1954, 32.7 PERCENT LOWER THAN THE SECOND LOW BID, AND 43 PERCENT LOWER THAN THE AVERAGE BID RECEIVED ON THE THEN CURRENT INVITATION.

"THE REPRESENTATIVES OF THE CONTRACT OFFICER DISCUSSED AMONG THEMSELVES THE APPARENT LOWNESS OF THE BID AND THE POSSIBILITY OF MISTAKE THEREIN. THEIR PROCEDURE WAS TO CALL APPELLANT ON THE TELEPHONE AND REQUEST CONFIRMATION OF THE BID, APPARENTLY IN AN ATTEMPT TO AVOID THE LEGAL EFFECT OF THE DECISION IN 35 COMP. GEN. 136. THE BID IN THIS REGARD WAS CONFIRMED BY LETTER FROM APPELLANT'S GENERAL MANAGER, ON 3 FEBRUARY 1956, AND AT THE SAME TIME A CORRECTION WAS MADE IN THE EXTENSION OF THE UNIT PRICE QUOTED FOR ITEMS F.O.B. CARS, CONTRACTOR'S PLANT.'

AS CORRECTED, THE BID WAS THEREUPON ACCEPTED, IN THE AMOUNT OF $38,001.68, AND CONTRACT NO. DA-11-009-QM-25330 WAS CONSUMMATED BY FORMAL NOTICE OF AWARD DATED FEBRUARY 14, 1956.

AFTER ORDERING MATERIALS AND SOME ADDITIONAL EQUIPMENT, AND SUBMITTING A PREPRODUCTION SAMPLE WHICH WAS REJECTED, YOUR FIRM ALLEGED THAT THE BID HAD BEEN IMPROPERLY COMPUTED, IN THAT NO ALLOWANCES HAD BEEN MADE IN THE BID PRICE FOR: (1) COST OF DIES, (2) COST OF MOLDS, (3) COST OF POLYETHYLENE BAGS, (4) PACKAGING COSTS BASED ON MATERIALS REQUIRED TO MEET THE COVERING SPECIFICATIONS FOR DOMESTIC AND EXPORT PACKING, (5) INSPECTION COSTS, (6) COSTS OF NEW EQUIPMENT NECESSARY TO FULFILL THE CONTRACT, AND (7) DEPRECIATION, OVERHEAD AND ADMINISTRATIVE EXPENSES. ORAL REPRESENTATIONS AND BY LETTER DATED MAY 1, 1956, YOUR FIRM ADVISED THE CONTRACTING OFFICER THAT YOU WERE INCAPABLE OF PERFORMING UNDER THE TERMS OF THE CONTRACT, AND NOTICE OF TERMINATION FOR DEFAULT WAS PROMPTLY ISSUED. ON JUNE 26, 1956, THE CONTRACT WAS RELET TO THE SECOND LOWEST BIDDER AT AN AMOUNT $10,796.33 IN EXCESS OF YOUR CONTRACT PRICE.

THE DEFAULT ACTION WAS APPEALED TO THE ASBCA, WHICH HELD THAT IT WAS CORRECT, AND HELD FURTHER THAT IT WAS WITHOUT JURISDICTION TO GRANT RELIEF FOR THE ALLEGED ERROR IN BID.

YOUR ATTORNEYS ALLEGE THAT YOUR CASE IS SIMILAR TO 35 COMP. GEN. 136, REQUEST RESCISSION ON THE GROUND OF MUTUAL MISTAKE, AND RELIEF FROM THE ASSESSMENT OF EXCESS COSTS. IT IS ALLEGED THAT THE REQUEST FOR VERIFICATION WAS INADEQUATE, IN THAT THE CONTRACTING OFFICER DID NOT CALL YOUR FIRM'S ATTENTION TO THE FACT THAT NO SAMPLE WOULD BE FURNISHED AND THAT A NEW MOLD WOULD BE AN ABSOLUTE NECESSITY UNDER AN ALLEGED SLIGHT CHANGE IN THE SPECIFICATIONS. FURTHER, IT IS ALLEGED THAT THE MANAGING PARTNER WHO SIGNED BOTH THE BID AND THE VERIFICATION DID NOT SUBMIT A POWER OF ATTORNEY WITH THE BID, AND THAT IN THE PREPARATION OF THE BID AND THE VERIFICATION HE ACTED WITHOUT AUTHORITY AND CONTRARY TO SPECIFIC INSTRUCTIONS FROM THE FIRM. ALSO, IT IS ALLEGED THAT IN THE GOVERNMENT'S PRE-AWARD SURVEY PRIOR TO THE CONTRACT AWARD A CARELESS PHYSICAL INSPECTION WAS MADE OF YOUR FACILITIES.

OUR DECISION IN 35 COMP. GEN. 136 WAS PREMISED ON THE FACT THAT, NOTWITHSTANDING THE BIDDER'S VERIFICATION, AT THE TIME OF AWARD THE CONTRACTING OFFICER HAD CONSTRUCTIVE NOTICE OF THE SPECIFIC MISTAKE. THAT SITUATION, WE HELD THAT THE CONTRACTOR WAS NOT BOUND BY THE VERIFICATION SINCE THE GENERAL REQUEST FOR IT FAILED TO PUT THE CONTRACTOR ON NOTICE OF THE SPECIFIC MISTAKE SURMISED BY THE CONTRACTING OFFICER.

YOUR CASE CLEARLY CAN BE DISTINGUISHED FROM THE AFOREMENTIONED DECISION. YOUR ATTORNEYS SUGGEST THAT THE SPECIFICATIONS ARE MISLEADING BECAUSE THEY MAKE NO REFERENCE TO THE FACT THAT SAMPLES WILL NOT BE FURNISHED TO THE CONTRACTORS AND BECAUSE THEY DO NOT INDICATE A SLIGHT CHANGE OVER PRIOR SPECIFICATIONS. HOWEVER, WE FIND THAT BOTH THE INVITATION AND YOUR BID WERE CLEAR AND UNAMBIGUOUS ON THEIR FACE. THE PRICE VARIANCE MADE THE CONTRACTING OFFICER SUSPECT AN ERROR IN YOUR BID; HOWEVER THERE WAS NOTHING TO INDICATE THE NATURE OF THE MISTAKE. IN SUCH SITUATION, THE PROCUREMENT OFFICIAL COULD DO NO MORE THAN SUGGEST THE POSSIBILITY OF ERROR AND AFFORD THE BIDDER AN OPPORTUNITY TO CHECK THE ACCURACY AND CORRECTNESS OF THE BID, BY REQUESTING VERIFICATION. IMPLICIT IN A REQUEST FOR VERIFICATION IS THE SUGGESTION OF MISTAKE, AND IN THE ABSENCE OF ANY KNOWLEDGE AS TO HOW THE BIDDER COMPUTED ITS BID, THE CONTRACTING OFFICER COULD NOT BE EXPECTED TO SUGGEST THE EXACT NATURE OR SOURCE OF ANY MISTAKE WHICH MAY HAVE BEEN MADE. WE THEREFORE CONCLUDE THAT IN THIS CASE THERE IS NO BASIS TO FIND A MUTUAL MISTAKE.

IN REGARD TO THE MANAGING PARTNER'S LACK OF AUTHORITY, THE ARMED SERVICES BOARD OF CONTRACT APPEALS HAS FOUND THAT HIS ACTS, WHETHER AUTHORIZED OR NOT, WERE RATIFIED BY YOUR FIRM. IN ADDITION, YOUR ATTORNEYS HAVE STATED:

"IN SUBSTANCE, TRAND PLASTICS COMPANY, BY A GENERAL MANAGER ACTING WITHOUT AUTHORITY, MADE A BID ON MESS TRAY LINERS ON THE AFORESAID CONTRACT UNDER A GROSS MISTAKE. THE BID WAS VERIFIED BY THE SAME GENERAL MANAGER, AGAIN WITHOUT AUTHORITY, AND THE PARTNERS OF TRAND PLASTICS COMPANY THEN ATTEMPTED TO PERFORM UNDER THE CONTRACT * * *.'

RATIFICATION MAY BE IMPLIED FROM ACTS AND CONDUCT ON THE PART OF THE OTHER PARTNERS WHICH REASONABLY TEND TO SHOW AN INTENTION TO RATIFY THE UNAUTHORIZED ACT. 40 AM.JUR., PARTNERSHIP 145. ASIDE FROM THE FACT OF RATIFICATION, THE BID SHOWED ON ITS FACE THAT YOUR FIRM WAS A PARTNERSHIP AND THAT THE PERSON WHO SIGNED IT WAS A PARTNER. NO FURTHER SHOWING OF AUTHORITY WOULD BE REQUIRED UNLESS THE ACT INVOLVED WAS OUTSIDE THE SCOPE OF THE PARTNERSHIP BUSINESS, OR THE PARTY DEALING WITH THE PARTNERSHIP HAD ACTUAL NOTICE OF LIMITATIONS ON THE AUTHORITY OF THE ACTING PARTNER.

IN REGARD TO THE ALLEGATION THAT PRIOR TO AWARD A CARELESS PHYSICAL INSPECTION WAS MADE OF YOUR FACILITIES, THE ARMED SERVICES BOARD OF CONTRACT APPEALS HAS FOUND THAT THE PRE-AWARD SURVEY DISCLOSED NOTHING THAT WOULD JUSTIFY THE REJECTION OF YOUR BID BY THE CONTRACTING OFFICER. FURTHERMORE, AS WAS SAID IN THE BOARD'S OPINION, "THE PRE AWARD SURVEY IS MADE FOR THE BENEFIT OF GOVERNMENT AND FOR ITS GUIDANCE IN MAKING THE AWARD.' THE SUBMISSION OF A BID IN AN OFFER TO PERFORM A CONTRACT, AND THE FAILURE OF THE GOVERNMENT TO FIND OUT IN ADVANCE OF ACCEPTANCE THAT THE BIDDER IS NOT CAPABLE OF PERFORMING IS NO GROUND FOR RELIEVING THE BIDDER OF RESPONSIBILITY FOR ITS FAILURE.

IN THE CIRCUMSTANCES, THE GOVERNMENT WAS ENTITLED TO RELET THE WORK AND CHARGE YOUR FIRM WITH THE DEFICIENCY. ACCORDINGLY, UNLESS SATISFACTORY ARRANGEMENTS FOR SETTLEMENT ARE MADE, YOUR INDEBTEDNESS WILL BE REPORTED TO THE DEPARTMENT OF JUSTICE FOR COLLECTION ACTION.