B-123339, JULY 20, 1955, 35 COMP. GEN. 33

B-123339, JULY 20, 1955, 35 COMP. GEN. 33

BIDS - ACCEPTANCE OR REJECTION - ACCEPTANCE OF OTHER THAN LOWEST - APPARENTLY ERRONEOUS BIDS THE AWARD OF A CONTRACT TO AN OSTENSIBLE LOW BIDDER WHO IS UNABLE TO SUBMIT CONCLUSIVE EVIDENCE IN SUPPORT OF ITS CONTENTION THAT THE QUOTATION OF RIDICULOUSLY LOW PRICES WAS NOT ERRONEOUS BUT AS ORIGINALLY INTENDED WOULD BE A VIOLATION OF THE RIGHTS OF OTHER BIDDERS AND MAY NOT BE MADE DESPITE THE POSSIBLE MONETARY ADVANTAGE WHICH THE GOVERNMENT MIGHT OBTAIN.

TO NORTH AMERICAN PACKING AND PROCESSING CORPORATION, JULY 20, 1955:

REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A CONTRACT TO CARGO PACKERS, INC., BROOKLYN, NEW YORK, PURSUANT TO CORPS OF ENGINEERS, UNITED STATES ARMY, NEW YORK DISTRICT, INVITATION NO. ENG-30 075-55-227, WHEREIN BIDS WERE REQUESTED FOR THE FURNISHING OF 34 ITEMS OF PROCESSING AND PACKING SERVICES FOR OVERSEAS SHIPMENT OF SUPPLIES DURING A ONE-YEAR PERIOD COMMENCING ON OR ABOUT MARCH 1, 1955.

THE RECORD NOW SHOWS THAT ON THE BASIS OF QUOTED UNIT PRICES THE BID OF YOUR COMPANY, IN THE AMOUNT OF $404,970.50, AND THAT OF CARGO PACKERS, INC., IN THE AMOUNT OF $410,006, WERE THE TWO LOWEST OF THE 13 BIDS RECEIVED IN RESPONSE TO THE INVITATION. HOWEVER, THE EXTENDED AMOUNTS IN THE FORMER BID TOTALED THE SUM OF $416,362.50. THERE WERE FIVE DISCREPANCIES BETWEEN UNIT PRICES AND EXTENDED AMOUNTS AND IT WAS NOTED THAT THREE OTHER PRICES AS TO WHICH THERE WERE NO DISCREPANCIES BETWEEN UNIT PRICES AND EXTENDED AMOUNTS SEEM DISPROPORTIONATE TO THEIR VALUE.

BY LETTER DATED JANUARY 13, 1955, YOU WERE REQUESTED TO VERIFY THE ACCURACY OF EIGHT OF YOUR BID PRICES. IN REPLY OF JANUARY 17, 1955, YOU ADVISED THE OFFICE OF THE DISTRICT ENGINEER TO THE EFFECT THAT ALL OF THE EIGHT QUESTIONED PRICES WERE CORRECT AND THAT THE EXTENDED AMOUNTS RELATING TO FIVE OF THE ITEMS OR SUBITEMS OF YOUR BID SHOULD BE CHANGED TO AGREE WITH THE STATED UNIT PRICES. A CONTROVERSY LATER DEVELOPED IN REGARD TO THE PRICES QUOTED ON SUBITEMS (B) AND (C) OF ITEM 33, WHICH HAS REFERENCE TO PACKING IN CONEX TRANSPORTERS TO BE SUPPLIED BY THE GOVERNMENT. ON THAT ITEM YOUR BID PRICES WERE AS FOLLOWS:

TABLE

QUANTITY UNIT UNIT PRICE AMOUNT (A) IDENTICAL ITEM PACKAGE

400 EACH $5.00 $2,000.00 (B) 1 TO 50 WORK ORDERS --- 400 --DO-- .30 12,000.00 (C) OVER 50 WORK ORDERS -- 20 -DO-- .40 800.00

THE CONTRACTING OFFICER DETERMINED THAT THE REASONABLE PRICE RANGE FOR WORK REQUIRED UNDER ITEM 33 SHOULD HAVE BEEN BETWEEN $30 AND $60 AND THAT IN ALL PROBABILITY YOUR INTENDED PRICES ON SUBITEMS (B) AND (C) WERE $30 AND $40, WHICH PRICES WOULD BE IN AGREEMENT WITH THE EXTENDED AMOUNTS OF $12,000 AND $800. ALTHOUGH YOU ALLEGED THAT THE QUOTATIONS ON ITEM 33 WERE CONSIDERED IN CONJUNCTION WITH THE UNIT PRICE OF $1.35 QUOTED UNDER ITEM 32 FOR THE FURNISHING OF APPROXIMATELY 30,000 SETS OF SHIPPING DOCUMENTS, THERE WAS FOUND TO BE NO REASONABLE RELATIONSHIP BETWEEN THE ALLEGED AMOUNT OF PROFIT ON ITEM 32 AND THE PRICES QUOTED ON THE TWO ITEMS. ALSO, YOUR PENCIL WORK COPY OF THE INVITATION WAS FOUND IN CERTAIN RESPECTS TO WARRANT THE CONCLUSION THAT YOU ACTUALLY INTENDED TO BID THE PRICES OF $30 AND $40 ON SUBITEMS (B) AND (C) OF ITEM 33.

IN THE CIRCUMSTANCES, THE CONTRACTING OFFICER CONCLUDED THAT TO PERMIT THE UNIT PRICES TO CONTROL, WHICH ORDINARILY WOULD BE THE CASE WHEN DISCREPANCIES HAVE BEEN FOUND BETWEEN UNIT PRICES AND EXTENDED AMOUNTS SHOWN IN A BID, WOULD RESULT IN A SERIOUS WEAKENING OF COMPETITIVE BIDDING PRACTICES. THIS CONCLUSION WAS BASED UPON THE APPARENT FACT THAT, IF YOU HAD ELECTED TO ALLEGE ERRORS IN THE UNIT PRICES OF SUBITEMS (B) AND (C) OF ITEM 33, YOUR COMPANY COULD HAVE SUCCESSFULLY MAINTAINED THAT THE EXTENDED AMOUNTS WERE CORRECT AND OBTAINED THE AWARD IF NO OTHER BIDDER HAD QUOTED PRICES TOTALING A LESSER SUM THAN THE AMOUNT OF $416.362,50. THE MATTER WAS SUBMITTED TO HIGHER AUTHORITY AND, BY ENDORSEMENT OF MARCH 15, 1955, THE OFFICE OF THE CHIEF OF ENGINEERS AUTHORIZED THE AWARD TO BE MADE TO CARGO PACKERS, INC.

FOLLOWING THE RECEIPT OF THE DEPARTMENTAL REPORT IN THE MATTER, THE REPORTED FACTS AND CIRCUMSTANCES OF THE CASE WERE DISCUSSED ON TWO OCCASIONS WITH MR. A. R. KLEIN, SECRETARY-1TREASURER OF YOUR COMPANY. THOROUGH STUDY OF THE PENCIL WORK COPY OF YOUR BID WAS MADE IN CONNECTION WITH THE CONTENTION THAT, WHEREAS THE FIGURES 30 AND 40 WERE FOLLOWED BY DASH MARKS, THE BIDDER'S INTENTION WAS CLEARLY EVIDENCED BY DECIMAL POINTS PRECEDING THOSE FIGURES. HOWEVER, THE DASH MARKS SEEMED TO FOLLOW A GENERAL PATTERN OF INDICATING FULL DOLLAR AMOUNTS AND IT WAS NOTED THAT THE EXTENDED AMOUNT ON THE WORK COPY HAD BEEN CHANGED AFTER RECEIPT OF THE DISTRICT ENGINEER'S LETTER OF JANUARY 13, 1955. IT IS ENTIRELY POSSIBLE THAT, IN MAKING SUCH CHANGES, THE DECIMAL POINTS WERE THEN PLACED BEFORE THE FIGURES 30 AND 40 SO THAT THE WORK COPY OF THE BID WOULD AGREE WITH THE CHANGED EXTENDED AMOUNTS. IN ANY EVENT, THE WORK COPY OF THE BID, AS CHANGED BY AN OFFICIAL OF YOUR COMPANY, WAS CONSIDERED BY OUR REPRESENTATIVES TO BE INCONCLUSIVE UPON THE QUESTION AS TO WHETHER OR NOT THE INTENDED PRICES WERE $0.30 AND $0.40, AS ALLEGED. QUESTION ALSO WAS RAISED AS TO WHY, SINCE THE WORK REQUIRED UNDER SUBITEM (A) OF ITEM 33 SEEMED TO BE A LESS EXPENSIVE OPERATION THAN THE PERFORMANCE OF WORK REQUIRED UNDER SUBITEMS (B) AND (C), A MUCH HIGHER UNIT PRICE OF $5 WAS QUOTED ON SUBITEM (A).

ADMITTEDLY, THE PRICES QUOTED ON SUBITEMS (B) AND (C) WERE RIDICULOUSLY LOW, BUT IT WAS CONTENDED THAT IT IS A GENERAL PRACTICE AMONG BIDDERS ON GOVERNMENT CONTRACTS TO QUOTE RIDICULOUSLY LOW PRICES ON ONE OR MORE ITEMS WHEN THE AWARD IS TO BE BASED UPON THE LOWEST TOTAL BID ON SEVERAL ITEMS OF AN ADVERTISEMENT FOR BIDS. OUR REPRESENTATIVES WERE REQUESTED TO EXAMINE THE QUOTATIONS OF OTHER BIDDERS SINCE IT WAS UNDERSTOOD THAT ON SOME ITEMS THE OTHER BIDDERS HAD EITHER INSERTED THE WORDS "NO CHARGE" OR QUOTED PRICES KNOWN TO BE CONSIDERABLY LESS THAN THE COST OF THE WORK INVOLVED. FURTHER, THE REJECTION OF YOUR BID WAS CONSIDERED TO HAVE BEEN IMPROPER AS HAVING BEEN IN VIOLATION OF THE PROVISION IN PARAGRAPH 10 (D) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, THAT " IN CASE OF MISTAKE IN EXTENSION OF PRICE, THE UNIT PRICE WILL GOVERN.' A MEMORANDUM PREPARED BY YOUR ATTORNEY AND WHICH RELATES PRIMARILY TO THIS ISSUE WAS SUBMITTED TO OUR REPRESENTATIVES AT THE LAST OF THE TWO CONFERENCES.

IT IS CONTENDED IN YOUR ATTORNEY'S MEMORANDUM THAT, AS EVIDENCED BY THE PROVISION IN PARAGRAPH 10 (D) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, THE GOVERNMENT DOES NOT TREAT A MISTAKE IN THE STATEMENT OF THE EXTENDED PRICE ON A BID ITEM AS ALL-IMPORTANT IN THAT, WHILE THE EXTENDED PRICE IS ALWAYS A CLERICAL MATTER INVOLVING A SIMPLE MATTER OF MULTIPLICATION, A MISTAKE RESPECTING THE STATEMENT OF A UNIT PRICE IS MUCH MORE SERIOUS. IT IS FURTHER CONTENDED THAT IT IS NOT THE PROVINCE OF THE GOVERNMENT TO DETERMINE WHETHER A BIDDER WAS OR WAS NOT WISE IN SPECIFYING A PARTICULAR UNIT PRICE, AND IMPLIED THAT THE SOLE RESPONSIBILITY OF A CONTRACTING OFFICER IS TO DETERMINE WHETHER THE UNIT PRICES MULTIPLIED BY THE SPECIFIED QUANTITIES EQUAL THE LOWEST TOTAL BID.

ORDINARILY, AS CONTENDED BY YOUR ATTORNEY, A MISTAKE IN A UNIT PRICE WOULD BE FAR MORE SERIOUS THAN A MISTAKE IN AN EXTENDED AMOUNT SHOWN IN A BID AND, FOR THAT REASON, THE GOVERNMENT HAS ADOPTED THE POLICY OF INVITING A BIDDER'S PARTICULAR ATTENTION TO THE POSSIBILITY OF ANY SUCH ERROR IN UNIT PRICE. ALSO, WE AGREE WITH THE STATEMENT THAT IT IS NOT THE PROVINCE OF THE GOVERNMENT TO DETERMINE WHETHER A BIDDER WAS OR WAS NOT WISE IN SPECIFYING A PARTICULAR UNIT PRICE. HOWEVER, WE CANNOT ACCEPT THE THEORY THAT A CONTRACTING OFFICER HAS NO ERROR DETECTION RESPONSIBILITY BUT SHOULD BE REQUIRED TO ACCEPT THE LOWEST TOTAL BID REGARDLESS OF PROBABLE MISTAKES IN THE UNIT PRICES OF SUCH BID.

IN THIS CONNECTION, IT IS WELL ESTABLISHED THAT A BID CANNOT BE CONSIDERED AS HAVING BEEN ACCEPTED IN GOOD FAITH IF AN ERROR IN THE BID IS SO APPARENT THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER KNEW OF THE MISTAKE AND SOUGHT TO TAKE ADVANTAGE OF IT. THAT COULD WELL HAVE BEEN THE SITUATION IN THE PRESENT CASE IF NO QUESTION HAD BEEN RAISED CONCERNING THE UNIT PRICES QUOTED BY YOUR COMPANY ON SUBITEMS (B) AND (C) OF ITEM 33, WHETHER OR NOT THERE HAD BEEN ANY DISCREPANCIES BETWEEN THE UNIT PRICES AND THE EXTENDED AMOUNTS FOR THOSE SUBITEMS. AS A MATTER OF FACT, THE EXTENDED AMOUNTS ARE SIGNIFICANT ONLY BECAUSE THEY AGREE WITH THE STATED UNIT PRICES WHEN MULTIPLIED BY 100, WHICH TYPE OF DISCREPANCY IS NOT UNUSUAL, AND IT APPEARED REASONABLY CERTAIN THAT MISTAKES WERE MADE IN THE UNIT PRICES THEMSELVES--- THE TOTALS BEING AS INTENDED.

WE HAVE CAREFULLY EXAMINED THE ABSTRACT OF BIDS PREPARED IN THE INSTANT CASE AND FIND NO SUBSTANTIAL BASIS FOR THE CONCLUSION THAT ANY OF THE BIDDERS DELIBERATELY QUOTED RIDICULOUSLY LOW PRICES ON ANY OF THE 34 PRIMARY ITEMS. OF COURSE, THERE WERE WIDE RANGES IN PRICES ON SEVERAL ITEMS BUT THAT IS NORMALLY TO BE EXPECTED WHEN BIDDERS ARE QUOTING ON VARIOUS ITEMS AS TO WHICH THEIR ESTIMATES OF COST MIGHT VARY TO A CONSIDERABLE EXTENT. ONLY ONE BIDDER INSERTED THE WORDS ,NO CHARGE" FOR AN ITEM, AND THAT WAS DONE ONLY AT ITEM 32, CLEARLY INDICATING THAT THIS BIDDER HAD MADE NO ATTEMPT TO ASSESS THE ACTUAL COST OF THIS TYPE OF OVERHEAD EXPENSE, BUT HAD MADE SUFFICIENT ALLOWANCES FOR OVERHEAD COSTS IN BIDDING ON THE REMAINING 33 ITEMS. WHILE THREE OTHER BIDDERS QUOTED PRICES OF ONLY $0.08, $0.20 AND $0.30 ON ITEMS 32, AS COMPARED WITH A PRICE RANGE OF BETWEEN $0.80 AND $1.35 IN THE PRICES QUOTED BY NINE BIDDERS, THE THREE LOWER AMOUNTS MIGHT WELL BE CONSIDERED AS REPRESENTING NOMINAL CHARGES IN THAT THE BIDDERS APPARENTLY DID NOT BELIEVE IT NECESSARY TO DETERMINE THE EXACT AMOUNT OF CLERICAL AND OTHER GENERAL EXPENSES WHICH MIGHT BE INVOLVED IN THE PREPARATION OF THE SHIPPING DOCUMENTS.

ON ITEM 33, FIVE OF THE 13 BIDS, INCLUDING THAT OF YOUR COMPANY, WERE VERY LOW IN COMPARISON WITH PRICES QUOTED BY THE OTHER BIDDERS, BUT IT IS APPARENT THAT ALL OF THE FIVE LOWER BIDS ON ITEM 33 WERE THE RESULT OF MISTAKES MADE BY THE BIDDERS INSTEAD OF ANY INTENTION DELIBERATELY TO QUOTE RIDICULOUSLY LOW PRICES.

IN FURTHER REFERENCE TO THIS PARTICULAR ARGUMENT, IT IS INTERESTING TO NOTE THAT, BY DECISION TO THE SECRETARY OF THE ARMY ON DECEMBER 11, 1953, B-117852, WE CONSIDERED AND APPROVED ADJUSTMENTS IN THE BID PRICES OF THE TERMINAL TRUCKING COMPANY, 215-225 WATER STREET, BROOKLYN, NEW YORK, AND ANOTHER FIRM AS JOINT VENTURER, ON FOUR SUBITEMS OF AN INVITATION FOR BIDS COVERING 32 PRIMARY ITEMS OF PACKING SERVICES. THE BID WAS SIGNED BY MR. ABE KLEIN AND BY MR. H. A. HARVEY, THE PRESIDENT OF YOUR COMPANY. THE CORRECTIONS IN THE BID WERE PERMITTED ON THE BASIS OF A SHOWING THAT THE PRICES WERE VERY LOW AS COMPARED WITH THE PRICES QUOTED BY THE OTHER BIDDERS AND ESTIMATES OF COST PREPARED BY A PACKING SPECIALIST IN THE OFFICE OF THE DISTRICT ENGINEER, NEW YORK DISTRICT. IN THAT CASE, THE CORRECTION OF THE BID DID NOT RESULT IN ITS REJECTION BECAUSE, WITH THE APPROPRIATE ADJUSTMENTS, IT WAS STILL THE LOWEST OF THE SEVERAL BIDS RECEIVED IN RESPONSE TO THE PARTICULAR INVITATION. CERTAINLY, NEITHER MR. KLEIN NOR MR. HARVEY WAS THEN OF THE OPINION THAT A CONTRACTING OFFICER SHOULD NOT BE CONCERNED WITH ANY APPARENT INDICATION THAT A BID PRICE IS RIDICULOUSLY LOW WHEN COMPARED WITH ONE OR MORE OTHER PRICES SET FORTH IN THE BID OR WITH THE PRICES QUOTED BY OTHER BIDDERS.

THE QUESTION WAS RAISED AT THE TWO CONFERENCES AS TO WHY IT IS NECESSARY TO CONSIDER THE RIGHTS OF OTHER BIDDERS IN A SITUATION WHERE, AS HERE, ALL OF THE AVAILABLE EVIDENCE POINTS TO THE CONCLUSION THAT SOME OF THE BID PRICES OF AN OSTENSIBLE LOW BIDDER WERE NOT AS INTENDED BY THE BIDDER, BUT THE BIDDER HAS OFFERED TO FULFILL THE CONTRACT ON THE BASIS OF ITS STATED PRICES AND TO FURNISH A CASH DEPOSIT OR OTHER SECURITY FOR THE FAITHFUL PERFORMANCE OF THE CONTRACT.

IN UNITED STATES V. BROOKRIDGE FARM, 111 F.2D 461. IT WAS SAID, WITH RESPECT TO STATUTES AND REGULATIONS REQUIRING THE AWARD OF CONTRACTS AFTER PUBLIC ADVERTISING AND BIDDING:

THE PURPOSE OF THESE STATUTES AND REGULATIONS IS TO GIVE ALL PERSONS EQUAL RIGHT TO COMPETE FOR GOVERNMENT CONTRACTS; TO PREVENT UNJUST FAVORITISM, OR COLLUSION OR FRAUD IN THE LETTING OF CONTRACTS FOR THE PURCHASE OF SUPPLIES; AND THUS TO SECURE FOR THE GOVERNMENT THE BENEFITS WHICH ARISE FROM COMPETITION. IN FURTHERANCE OF SUCH PURPOSE, INVITATIONS AND SPECIFICATIONS MUST BE SUCH AS TO PERMIT COMPETITORS TO COMPETE ON A COMMON BASIS. CONDITIONS OR LIMITATIONS WHICH HAVE NO REASONABLE RELATION TO THE ACTUAL NEEDS OF THE SERVICE AND WHICH ARE DESIGNED TO LIMIT BIDDING TO ONE OF SEVERAL SOURCES OF SUPPLY ARE INTERDICTED, AND RENDER THE AWARD OF A CONTRACT MADE IN SUCH CIRCUMSTANCES VOIDABLE.

OBVIOUSLY, IN OUR OPINION, BIDDERS WOULD NOT BE COMPETING UPON A COMMON BASIS IF, AFTER OPENING OF THE BIDS, THE OSTENSIBLE LOW BIDDER WERE PLACED IN THE FAVORABLE POSITION OF EITHER BEING ABLE TO WITHDRAW ITS BID, CLAIM AND OBTAIN A CORRECTION IN ITS BID PRICES OR INSIST UPON THE CORRECTNESS OF ITS BID PRICES WITHOUT SUBMITTING CONCLUSIVE EVIDENCE IN SUPPORT OF ITS CONTENTION THAT ITS QUOTATIONS OF RIDICULOUSLY LOW PRICES WERE AS ORIGINALLY INTENDED.

UNDOUBTEDLY, IF YOU HAD SO DESIRED, YOU COULD HAVE MAINTAINED THAT YOUR UNIT PRICES ON SUBITEMS (B) AND (C) OF ITEM 33 WERE INCORRECT, BUT THAT MIGHT NOT HAVE BEEN TO THE ADVANTAGE OF YOUR COMPANY SINCE IT WOULD NOT THEN HAVE QUALIFIED AS THE LOW BIDDER. ON THE OTHER HAND, IF THE CORRECTION OF YOUR BID WOULD NOT HAVE RESULTED IN MAKING YOUR TOTAL PRICE EXCEED THAT OF CARGO PACKERS, INC., THERE IS NO REASONABLE ASSURANCE THAT A CLAIM OF ERROR WOULD NOT HAVE BEEN MADE WITH THE REQUEST THAT THE PARTICULAR UNIT PRICES BE CORRECTED TO SHOW THE AMOUNTS OF $30 AND $40 INSTEAD OF THE APPARENTLY INCORRECT PRICES OF $0.30 AND $0.40. THE CONTRACTING OFFICER HAS APTLY DESCRIBED THE CHOICE WOULD BE ALLOWED TO A BIDDER UNDER SUCH CIRCUMSTANCES AS AFFORDING THE BIDDER "AN OPPORTUNITY FOR A SECOND GUESS AFTER BIDS WERE OPENED.' ANY SUCH CHOICE WOULD CLEARLY OPERATE AS HAVING AN ADVERSE EFFECT UPON THE RIGHTS OF THE OTHER BIDDERS TO COMPETE ON EQUAL TERMS FOR THE BUSINESS OF THE GOVERNMENT AND WE CANNOT APPROVE THE VIOLATION OF ANY SUCH RIGHTS IN ANY CASE SOLELY BY REASON OF A POSSIBLE MONETARY ADVANTAGE WHICH THE GOVERNMENT MIGHT OBTAIN THROUGH THE PROCESS OF ACCEPTING A BID KNOWN TO CONTAIN MISTAKES WHICH, IF CORRECTED IN ACCORDANCE WITH THE BIDDER'S TRUE INTENTION, WOULD NOT BE THE LOWEST APPARENTLY CORRECT BID RECEIVED IN RESPONSE TO THE INVITATION FOR BIDS.

ACCORDINGLY, YOU ARE ADVISED THAT THERE IS PERCEIVED NO LEGAL BASIS UPON WHICH WE WOULD BE WARRANTED IN TAKING EXCEPTION TO THE AWARD AS MADE TO CARGO PACKERS, INC. ..END :