B-174266, DEC 9, 1971

B-174266, DEC 9, 1971

BID PROTEST - MISTAKE IN BID - RELIEF DENIED - BUY AMERICAN ACT DECISION THAT NO LEGAL BASIS EXISTS FOR CANCELLING A CONTRACT WITH MCKESSON LABORATORIES FOR 5,400 BOTTLES OF MEPROBAMATE TABLETS UNDER AN IFB ISSUED BY THE VETERANS ADMINISTRATION, MARKETING DIVISION, DRUGS AND CHEMICALS, HINES, ILL. ALTHOUGH MCKESSON INADVERTENTLY FAILED TO INDICATE IN THE BUY AMERICAN PROVISION OF THE BID FORM THAT IT WOULD NOT FURNISH DOMESTIC END PRODUCTS, AND THAT THE MEPROBAMATE POWDER WOULD BE PROCURED FROM DENMARK, THE ACCEPTANCE OF THE BID BINDS THE BIDDER TO FURNISH A DOMESTIC SOURCE END PRODUCT AT THE PRICE BID. SEE 47 COMP. GEN. 624, 626 (1968). BECAUSE OF THE GOVERNMENT'S ACCEPTANCE OF THE BID IN GOOD FAITH, WITH NO ERROR HAVING BEEN ALLEGED UNTIL AFTER AWARD, THERE IS NO LEGAL BASIS FOR CANCELLING THE SUBJECT CONTRACT TO FURNISH DOMESTIC MEPROBAMATE TABLETS.

TO MR. DONALD E. JOHNSON:

REFERENCE IS MADE TO A LETTER 134G DATED OCTOBER 4, 1971, WITH ENCLOSURES, FROM THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, REQUESTING A DECISION AS TO WHETHER MCKESSON LABORATORIES MAY BE RELIEVED OF ITS OBLIGATIONS UNDER CONTRACT NO. V797P-5973(A), AWARDED UNDER INVITATION FOR BIDS (IFB) NO. M5-11-72, ISSUED BY THE VETERANS ADMINISTRATION, MARKETING DIVISION, DRUGS AND CHEMICALS, HINES, ILLINOIS.

THE INVITATION REQUESTED BIDS UNDER ITEM 13 FOR FURNISHING 5,400 BOTTLES OF MEPROBAMATE TABLETS. PAGE 2 OF THE BID FORM, STANDARD FORM 33, REQUESTED BIDDERS TO CERTIFY THAT, EXCEPT FOR END PRODUCTS LISTED IN THE SPACE PROVIDED THAT EACH END PRODUCT IS A DOMESTIC SOURCE END ITEM AS DEFINED IN THE BUY AMERICAN CLAUSE INCORPORATED INTO THE IFB.

TWO RESPONSIVE BIDS WERE RECEIVED ON ITEM 13. ONE OF THE BIDS WAS SUBMITTED BY ZENITH LABORATORIES, INC., WHICH OFFERED TO FURNISH THE MEPROBAMATE TABLETS UNDER ITEM 13 AT A PRICE OF $1.98 PER BOTTLE. ZENITH INDICATED IN ITS BID THAT IT INTENDED TO FURNISH A PRODUCT OF FOREIGN ORIGIN. THE ONLY OTHER BID ON ITEM 13 WAS SUBMITTED BY MCKESSON LABORATORIES AND IT OFFERED TO FURNISH THE MEPROBAMATE TABLETS UNDER ITEM 13 AT A PRICE OF $2.14 PER BOTTLE. AN EXAMINATION OF MCKESSON'S BID SHOWS THAT IT DID NOT LIST ANY EXCEPTIONS TO THE BUY AMERICAN REQUIREMENT. BECAUSE MCKESSON INDICATED IN ITS BID THAT IT INTENDED TO FURNISH A DOMESTIC PRODUCT BUT ALSO THAT THE CONTRACT WOULD BE SUBSTANTIALLY PERFORMED IN A LABOR SURPLUS AREA, A 12 PERCENT DIFFERENTIAL WAS APPLIED TO ZENITH'S BID PRICE OF $1.98 IN ACCORDANCE WITH FEDERAL PROCUREMENT REGULATIONS 1-6.104-4(B), WHICH MADE ITS EVALUATED BID PRICE HIGH. SEPTEMBER 2, 1971, ITEM 13 WAS AWARDED TO MCKESSON AS THE LOWEST BIDDER.

ON SEPTEMBER 8, 1971, THE VICE PRESIDENT OF MCKESSON ADVISED THE CONTRACTING OFFICER BY TELEPHONE THAT MCKESSON HAD INADVERTENTLY FAILED TO INDICATE IN THE BUY AMERICAN PROVISION THAT IT WOULD NOT FURNISH DOMESTIC END PRODUCTS, AND THAT THE MEPROBAMATE POWDER FROM WHICH THE TABLETS ARE MADE WOULD BE PROCURED FROM DENMARK. IN A CONFIRMING LETTER DATED SEPTEMBER 13, 1971, MCKESSON STATED THAT THE MEPROBAMATE POWDER COST EXCEEDS 51 PERCENT OF THE COST OF THE FINISHED BOTTLE OF MEPROBAMATE TABLETS WHICH ARE TO BE MANUFACTURED BY MCKESSON IN BRIDGEPORT, CONNECTICUT. IN SUPPORT OF ITS ALLEGATION OF ERROR, MCKESSON SUBMITTED ITS FILE COPY OF PAGE 2 OF STANDARD FORM 33 WHICH INDICATES THAT THE FOLLOWING ENTRY WAS MADE AS TO "BUY AMERICAN": "EXCLUDED END PRODUCTS MEPROBAMATE USP; COUNTRY OF ORIGIN-DENMARK."

THE DIRECTOR, SUPPLY SERVICE, ADVISES THAT HE AGREES WITH THE RECOMMENDATION OF THE CONTRACTING OFFICER THAT THE CONTRACT WAS ERRONEOUSLY AWARDED TO MCKESSON AND SHOULD BE CANCELED SINCE IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO MAKE AN AWARD TO ZENITH AT A SAVINGS OF $864.

IN HIS LETTER OF SEPTEMBER 14, 1971, TO MCKESSON, THE CONTRACTING OFFICER STATES: "YOUR SUBSEQUENT NOTIFICATION THAT YOU WERE IN FACT BIDDING ON A FOREIGN END PRODUCT, AS DEFINED IN THE BUY AMERICAN ACT, MAKES THIS AN ERRONEOUS AWARD." FOR REASONS SET OUT BELOW, WE DO NOT AGREE WITH THE POSITION OF THE CONTRACTING OFFICER IN THE MATTER.

THE BUY AMERICAN CERTIFICATE ON PAGE 2 OF THE IFB CONSTITUTES AN AFFIRMATION BY THE BIDDER THAT EACH END PRODUCT, EXCEPT AS NOTED THEREON BY THE BIDDER, IS A DOMESTIC SOURCE END PRODUCT AS DEFINED IN THE BUY AMERICAN ACT CLAUSE. WHEN A BIDDER MAKES NO ENTRY AS TO EXCLUDED END PRODUCTS, AS HERE, WE HAVE HELD THAT THE BID SHOULD BE REGARDED AS A DOMESTIC BID, ACCEPTANCE OF WHICH BINDS THE BIDDER TO FURNISH A DOMESTIC SOURCE END PRODUCT AS DEFINED IN THE BUY AMERICAN ACT CLAUSE. SEE 47 COMP. GEN. 624, 626 (1968); B-170803, NOVEMBER 3, 1970.

THE QUESTION REMAINING FOR CONSIDERATION IS NOT WHETHER AN ERROR WAS MADE IN THE BID BUT WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY ITS ACCEPTANCE. THE ONLY OTHER BID ON ITEM 13, WHICH OFFERED A FOREIGN SOURCE END PRODUCT, WAS IN THE AMOUNT OF $1.98 PER BOTTLE - $0.16 LESS THAN THE AMOUNT OF MCKESSON'S BID PRICE FOR THAT ITEM. IT IS REPORTED THAT THE MOST RECENT PURCHASE OF APPROXIMATELY THE SAME QUANTITY OF MEPROBAMATE TABLETS WAS MADE ON APRIL 30, 1971, OF A DOMESTIC PRODUCT AT $2.24 PER BOTTLE AND THAT MCKESSON DID NOT BID ON THIS PROCUREMENT. IN VIEW OF THE PRICE AT WHICH THE MOST RECENT DOMESTIC END ITEM PURCHASE WAS MADE AND THE FACT THAT MCKESSON'S BID PRICE FOR ITEM 13 WAS $0.16 HIGHER THAN THE PRICE QUOTED BY THE ONLY OTHER BIDDER ON THAT ITEM, WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF ERROR IN THE BID. ALTHOUGH, AFTER AWARD, MCKESSON FURNISHED EVIDENCE TO SUPPORT ITS ALLEGATION OF ERROR, IT DOES NOT APPEAR THAT PRIOR TO AWARD THE CONTRACTING OFFICER HAD KNOWLEDGE OF THE DIFFERENT FACTORS IT USED IN COMPUTING THE BID PRICE. SO FAR AS THE PRESENT RECORD SHOWS, THE ACCEPTANCE OF THE BID WAS IN GOOD FAITH, NO ERROR HAVING BEEN ALLEGED BY THE CORPORATION UNTIL AFTER AWARD. THE ACCEPTANCE OF THE BID, UNDER THE CIRCUMSTANCES INVOLVED, CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO. SEE EDWIN DOUGHERTY AND M. H. OGDEN V UNITED STATES, 102 CT. CL. 249, 259 (1944); SALIGMAN V UNITED STATES, 56 F. SUPP. 505, 507 (1944).

ACCORDINGLY, NO LEGAL BASIS EXISTS FOR CANCELING THE SUBJECT CONTRACT WHEREUNDER MCKESSON IS LEGALLY OBLIGATED TO FURNISH DOMESTIC MEPROBAMATE TABLETS AT ITS BID PRICE.

THE PAPERS SUBMITTED WITH THE LETTER OF OCTOBER 4, 1971, ARE RETURNED, AS REQUESTED.