B-124245, JUL. 28, 1955

B-124245: Jul 28, 1955

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO YOUR LETTER OF JUNE 23. DA-41-443-ENG-4618 WAS AWARDED. PROSPECTIVE BIDDERS WERE REQUESTED TO QUOTE ON ALTERNATES I (FLAT SLAB CONSTRUCTION). THREE BIDS WERE RECEIVED ON ALTERNATE I. NO BIDS WERE RECEIVED ON EITHER ALTERNATES II OR III. THE WORK TO BE PERFORMED UNDER ALTERNATE I WAS DIVIDED INTO35 ITEMS. UNDER THESE ALTERNATES BIDDERS WERE TO STATE THE AMOUNTS THEIR AGGREGATE BID PRICES FOR ALTERNATE I WERE TO BE INCREASED IF EITHER THE SUBSTITUTED OR ADDITIONAL WORK. WERE REQUIRED TO BE DONE. WERE IN THE AMOUNTS OF $1. THE GOVERNMENT'S COST ESTIMATE FOR THE WORK WAS $943. IT IMMEDIATELY SUSPECTED THAT IT MIGHT HAVE MADE AN ERROR IN ITS BID.

B-124245, JUL. 28, 1955

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 23, 1955, WITH ENCLOSURES, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN REGARDING ERRORS THE OTTINGER CONSTRUCTION COMPANY ALLEGES IT MADE IN ITS BID ON WHICH CONTRACT NO. DA-41-443-ENG-4618 WAS AWARDED.

BY INVITATION NO. ENG-41-443-55-116, THE OFFICE OF THE DISTRICT ENGINEER, FORT WORTH DISTRICT, REQUESTED BIDS--- TO BE OPENED ON APRIL 27, 1955--- FOR FURNISHING MATERIALS AND LABOR AND PERFORMING THE WORK REQUIRED FOR THE CONSTRUCTION OF FOUR 60-ROOM BACHELOR OFFICERS' QUARTERS AND APPURTENANCES AT FORT HOOD, TEXAS. PROSPECTIVE BIDDERS WERE REQUESTED TO QUOTE ON ALTERNATES I (FLAT SLAB CONSTRUCTION), II (REINFORCED MASONRY CONSTRUCTION), AND III (LIFT SLAB CONSTRUCTION). THREE BIDS WERE RECEIVED ON ALTERNATE I, BUT NO BIDS WERE RECEIVED ON EITHER ALTERNATES II OR III. THE WORK TO BE PERFORMED UNDER ALTERNATE I WAS DIVIDED INTO35 ITEMS, ITEM 1 CALLING FOR THE UNIT PRICE FOR EACH BUILDING. ADDITIVE ALTERNATES 1A AND 1B COVERED THE SUBSTITUTION OF CERTAIN WORK AND THE PERFORMANCE OF ADDITIONAL WORK, RESPECTIVELY, AND UNDER THESE ALTERNATES BIDDERS WERE TO STATE THE AMOUNTS THEIR AGGREGATE BID PRICES FOR ALTERNATE I WERE TO BE INCREASED IF EITHER THE SUBSTITUTED OR ADDITIONAL WORK, OR BOTH, WERE REQUIRED TO BE DONE.

IN RESPONSE TO THE INVITATION, THE OTTINGER CONSTRUCTION COMPANY SUBMITTED A BID QUOTING A UNIT PRICE OF $176,000 PER BUILDING FOR ITEM 1, AND A TOTAL AGGREGATE BID PRICE OF $862,575.10 FOR ALL 35 ITEMS OF ALTERNATE I. UNDER ADDITIVE ALTERNATES 1A AND 1B THE COMPANY INSERTED THE AMOUNTS OF $4,500 AND $74,500, RESPECTIVELY, INCREASING THE AGGREGATE BID PRICE TO $941,575.10. THE TWO OTHER BIDS ON ALTERNATE I, INCLUDING ADDITIVE ALTERNATES 1A AND 1B, WERE IN THE AMOUNTS OF $1,055,383.60 AND $1,080,674.10, AND THE GOVERNMENT'S COST ESTIMATE FOR THE WORK WAS $943,760.70.

BY TELEGRAM DATED APRIL 27, 1955--- THE DAY OF THE BID OPENING--- RECEIVED APRIL 28, THE OTTINGER CONSTRUCTION COMPANY ADVISED THAT AN ERROR HAD BEEN MADE IN ITS BID ON THE PROJECT AND REQUESTED THAT ITS BID BE WITHDRAWN. IN A CONFIRMING LETTER AND AFFIDAVIT DATED APRIL 29, 1955, THE COMPANY STATED THAT WHEN IT LEARNED OF THE AMOUNTS OF THE OTHER BIDS RECEIVED ON THE PROJECT, IT IMMEDIATELY SUSPECTED THAT IT MIGHT HAVE MADE AN ERROR IN ITS BID; THAT UPON INVESTIGATING THE MATTER IT DISCOVERED THAT THE QUANTITY ESTIMATE FOR THE MASONRY WORK REQUIRED UNDER ITEM 1, WHICH IT STATES WAS PROCURED FROM A COMMERCIAL ESTIMATOR, WAS ERRONEOUS IN THAT IT DID NOT INCLUDE ALL OF THE REQUIRED MATERIAL; THAT THE ADDITIONAL MATERIAL WOULD COST $6,822 FOR EACH BUILDING AND THAT TO THAT AMOUNT SHOULD BE ADDED THE SAME PERCENTAGE OF INSURANCE, TAXES, OVERHEAD AND SUPERVISION, EQUIPMENT, FUEL AND REPAIR, BOND, AND PROFIT AS USED IN ITS ORIGINAL WORKSHEETS. THE COMPANY REQUESTED THAT ITS BID ON THE PROJECT EITHER BE WITHDRAWN OR CORRECTED TO REFLECT AN INCREASE OF $7,819 IN THE UNIT PRICE OF ITEM 1. IN SUPPORT OF ITS ALLEGATION OF ERROR, THE COMPANY SUBMITTED (1) THE ORIGINAL WORKSHEETS USED IN COMPUTING ITS BID ON ITEM 1; (2) THE AFFIDAVIT OF THE COMPANY'S ESTIMATOR; (3) THE AFFIDAVIT OF MR. MORRIS, THE COMMERCIAL ESTIMATOR, IN WHICH HE REITERATED THE QUANTITY ESTIMATE WHICH, HE STATED, HE GAVE TO THE COMPANY PRIOR TO THE BID OPENING; AND (4) A REVISED QUANTITY ESTIMATE WHICH WAS PREPARED BY MR. MORRIS AFTER THE BID OPENING.

THE RECORD SHOWS THAT THE DISTRICT ENGINEER (CONTRACTING OFFICER) SUBMITTED THE MATTER OF THE ALLEGED ERROR BY THE OTTINGER CONSTRUCTION COMPANY TO THE OFFICE OF THE CHIEF OF ENGINEERS FOR CONSIDERATION AND WAS INSTRUCTED THAT THE BID OF THE COMPANY SHOULD BE CONSIDERED FOR AWARD IN THE FORM SUBMITTED. ACCORDINGLY, ON MAY 19, 1955, THE BID WAS ACCEPTED AND THE OTTINGER CONSTRUCTION COMPANY NOTIFIED OF THE AWARD OF A CONTRACT FOR THE WORK COVERED BY ALTERNATE I AND ADDITIVE ALTERNATES IA AND IB AT ITS ORIGINAL BID PRICE OF $941,575.10.

BY LETTERS DATED MAY 24 AND 26, 1955, THE COMPANY ADVISED THE DISTRICT ENGINEER OF ADDITIONAL ERRORS CLAIMED TO HAVE BEEN MADE IN ITS ORIGINAL WORKSHEETS, AND REQUESTED THAT THE TOTAL CONTRACT PRICE FOR THE FOUR BUILDINGS BE INCREASED BY $57,160 TO COVER THE ERRORS IN THE MASONRY WORK AND IN THE THREE OTHER ITEMS. THE CONTRACTOR HAS NOT EXECUTED THE CONTRACT OR FURNISHED A PERFORMANCE OR PAYMENT BOND, AND HAS INDICATED VERBALLY THAT IT DOES NOT INTEND TO EXECUTE THE CONTRACT UNTIL A DECISION HAS BEEN RENDERED BY THE COMPTROLLER GENERAL OF THE UNITED STATES.

IN A REPORT DATED MAY 2, 1955, THE CONTRACTING OFFICER STATES THAT THE GOVERNMENT ESTIMATE FOR THE MASONRY WORK WAS PREPARED BY MR. MORRIS, THE SAME COMMERCIAL ESTIMATOR WHO FURNISHED THE QUANTITY FIGURES TO THE OTTINGER CONSTRUCTION COMPANY, AND THAT THE AMOUNT OF THE GOVERNMENT ESTIMATE FOR THE MASONRY WORK IN THE FOUR BUILDINGS IS TOO LOW BY THE SUM OF $23,000. THE REPORT CONTINUES AS FOLLOWS:

"BASED UPON THE INFORMATION SET FORTH ABOVE, IT IS APPARENT THAT A MISTAKE EXISTS IN THE MASONRY QUANTITIES, BOTH IN THE BID OF OTTINGER CONSTRUCTION COMPANY, AND IN THE GOVERNMENT ESTIMATE. THE SUPPORTING EVIDENCE IS NOT SUFFICIENT TO SUPPORT THE INTENDED BID ALLEGED. THE CONTRACTOR'S ORIGINAL ESTIMATE WORK SHEETS FOR BID ITEM NO. 1 IS $201,300 PER BUILDING. HOWEVER, THE ORIGINAL ESTIMATE WORK SHEET CONTAINS THE NOTE "BID 180,300.' DURING CONFERENCE THE CONTRACTOR STATED THAT HE HAD CUT APPROXIMATELY $20,000 PER BUILDING OFF BID ITEM NO. 1 AND PLACED IT ON ANOTHER LUMP SUM ITEM, BID ITEM NO. 3, IN ORDER THAT EARLY PAYMENT OF THAT PORTION COULD BE OBTAINED. IT SHOULD BE NOTED THAT THE TOTAL OF BID ITEM NO. 3 IS APPROXIMATELY $80,000.00 HIGH. THE BID ITEMS SHOW THAT THE CONTRACTOR ACTUALLY BID $176,000 PER BUILDING IN LIEU OF $180,300. IT IS THEREFORE APPARENT THAT APPROXIMATELY $4000 ADDITIONAL WAS DEDUCTED FROM EACH BUILDING PRIOR TO SUBMITTING THE FINAL BID. THE REVISED ESTIMATE OF THE MASONRY FOR ONE BUILDING (EXHIBIT H) OF OTTINGER CONSTRUCTION COMPANY FAILS TO TAKE INTO CONSIDERATION THE ADDITIONAL DEDUCTION OF THE SAID $4000.00. THE TOTAL DEDUCTION OF $24,000 ON EACH BUILDING CAME OUT OF THE MASONRY BUT THERE IS NO WAY TO DETERMINE WHAT PART BECAUSE IT WAS A LUMP SUM DEDUCTION OF $24,000 FOR EACH BUILDING. IT WOULD LOGICALLY FOLLOW THAT HE WOULD ALSO HAVE REDUCED THE REVISED ESTIMATE (EXHIBIT H) IN THE SAME MANNER THAT HE REDUCED THE ORIGINAL ONE.

"A REVIEW OF THE FACTS AND CIRCUMSTANCES VERIFY THE APPARENT LOW BIDDER'S ALLEGATION THAT A MISTAKE WAS ACTUALLY MADE. THE GOVERNMENT ESTIMATES THAT THE AMOUNT OF THE ERROR IN THE MASONRY IS $23,000. THIS WOULD HAVE INCREASED THE UNIT PRICE FOR BID ITEM NO. 1 BY APPROXIMATELY $5750, AND WOULD HAVE RESULTED IN A REVISED UNIT PRICE IN THE GOVERNMENT ESTIMATE OF $206,535.00 FOR BID ITEM NO. 1. THE CONTRACTOR'S ORIGINAL ESTIMATE FOR THIS ITEM WAS $201,300.00. OF THIS AMOUNT HE ADMITTED THAT HE DEDUCTED APPROXIMATELY $420,000 (BUT THE RECORDS SHOW APPROXIMATELY $24,000 DEDUCTION) AND ADDED TO BID ITEM 3. THEREFORE,WHEN COMPARING HIS ORIGINAL ESTIMATE OF $201,300 WITH THE REVISED GOVERNMENT ESTIMATE OF $206,535, HE IS UNDER THE REVISED GOVERNMENT ESTIMATE BY ONLY 2 PLUS PERCENT. ADDING THE ABOVE $23,000 TO THE TOTAL ORIGINAL GOVERNMENT ESTIMATE OF $864,169.70 ($887,169.70), THE LOW TOTAL BID OF $862,575.10 IS WITHIN 3 PERCENT OF THE REVISED GOVERNMENT ESTIMATE. HIS TOTAL BID IS ONLY 8 PERCENT BELOW THE SECOND LOW BIDDER. IN COMPARING OTTINGER'S ITEM NO. 1 WITH THE 2ND LOW BID THE ABOVE $24,000 DEDUCTION SHOULD BE ADDED TO OTTINGER'S BID IN ORDER TO REFLECT A TIME COMPARISON. THEREFORE COMPARING OTTINGER'S BID FIGURE OF $176,000 PLUS APPROXIMATELY $24,000 ($201,000) WITH BATESON'S BID $225,000 MINUS $7,500 ($217,500) IT IS APPROXIMATELY 8 PERCENT BELOW THE NEXT HIGHEST BIDDER.'

IN A SUPPLEMENTAL REPORT DATED JUNE 2, 1955, FROM THE CONTRACTING OFFICER, IT IS STATED THAT FROM AN EXAMINATION OF THE COMPANY'S WORKSHEETS IT APPEARS THAT THE COMPANY MAY HAVE ERRED ON CERTAIN OTHER ITEMS, BUT THAT THE EXTENT OF THOSE ERRORS CANNOT BE DETERMINED FROM THE BID OR THE ORIGINAL WORK PAPERS.

WHILE IT IS TRUE THAT THE RESPONSIBILITY FOR THE PREPARATION OF A BID IS UPON THE BIDDER, WHO ORDINARILY MUST BEAR THE CONSEQUENCES OF AN ERROR IN THE BID UPON WHICH A CONTRACT IS BASED, THAT RULE DOES NOT ENTITLE THE GOVERNMENT TO TAKE ADVANTAGE OF A BIDDER'S ERROR WHEN, AS IN THE PRESENT CASE, IT HAS BEEN ALLEGED AND SATISFACTORILY ESTABLISHED PRIOR TO AWARD. THE GENERAL RULE IS THAT THE ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT. SEE NASON COAL COMPANY V. UNITED STATES, 64 C.CLS. 526; RESTATEMENT OF THE LAW OF CONTRACTS, SECTION 503; AND WILLISTON ON CONTRACTS, SECTION 1578. ALSO, SEE MOFFETT, HODGKINS, AND CLARKE COMPANY V. ROCHESTER, 178 U.S. 373; KEMP V. UNITED STATES, 38 F.SUPP. 568; ALTA ELECTRIC AND MECHANICAL COMPANY, INC. V. UNITED STATES, 90 C.CLS. 466; AND 17 COMP. GEN. 575, 576.

IN THE PRESENT CASE THE BIDDER SEEKS TO RECALCULATE AND CHANGE ITS BID TO INCLUDE FACTORS WHICH IT DID NOT HAVE IN MIND WHEN ITS BID WAS SUBMITTED, OR AS TO WHICH IT HAS SINCE CHANGED ITS MIND. THE BASIC RULE IS, OF COURSE, THAT BIDS MAY NOT BE CHANGED AFTER THEY ARE OPENED, AND THE EXCEPTION PERMITTING A BID TO BE CORRECTED UPON SUFFICIENT FACTS ESTABLISHING THAT A BIDDER ACTUALLY INTENDED TO BID AN AMOUNT OTHER THAN SET DOWN ON THE BID FORM, WHERE THE CONTRACTING OFFICER IS ON NOTICE OF THE ERROR PRIOR TO ACCEPTANCE, DOES NOT EXTEND TO PERMITTING A BIDDER TO RECALCULATE AND CHANGE HIS BID TO INCLUDE FACTORS WHICH HE DID NOT HAVE IN MIND WHEN HIS BID WAS SUBMITTED, OR AS TO WHICH HE HAS SINCE CHANGED HIS MIND. TO PERMIT THIS WOULD REDUCE TO A MOCKERY THE PROCEDURE OF COMPETITIVE BIDDING REQUIRED BY LAW IN THE LETTING OF PUBLIC CONTRACTS. SEE 17 COMP. GEN. 575, 577. HENCE, IN THE CIRCUMSTANCES, THE COMPANY MAY NOT BE PERMITTED TO CORRECT ITS BID.

ACCORDINGLY, SINCE THE COMPANY ALLEGED ERROR IMMEDIATELY AFTER THE BID OPENING AND SUBMITTED SATISFACTORY EVIDENCE IN SUPPORT THEREOF PRIOR TO AWARD, THE OTTINGER CONSTRUCTION COMPANY AND ITS SURETY MAY BE RELEASED FROM ANY LIABILITY RESULTING FROM THE ACCEPTANCE OF ITS BID, WHICH IN THE CIRCUMSTANCES CANNOT BE REGARDED AS CREATING A VALID AND BINDING CONTRACT.

THE CONTRACTING OFFICER'S REPORTS OF MAY 2 AND JUNE 2, 1955; THE AFFIDAVITS OF MR. D. P. MORRIS DATED APRIL 28 AND MAY 2, 1955; THE CONTRACTOR'S ORIGINAL AND REVISED WORKSHEETS; AND THE ABSTRACT OF THE BIDS ARE BEING RETAINED. THE OTHER PAPERS ARE RETURNED.

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