B-147884, MAR. 29, 1962
Highlights
THE INVITATION WAS ISSUED ON OCTOBER 10. BIDDERS WERE REQUIRED TO INDICATE WARRANTED CONSUMPTION CHARACTERISTICS OF THE EQUIPMENT OFFERED WHICH WOULD BE REQUIRED TO OBTAIN A GUARANTEED OUTPUT OF 1. THE WARRANTY IS STATED IN TERMS OF CONSUMPTION NOT IN EXCESS OF AMOUNTS ENTERED BY THE BIDDER FOR THE FOLLOWING ITEMS: (1) ENERGY INPUT EXCLUSIVE OF ELECTRIC ENERGY PER HOUR OF CONTINUOUS OPERATION AT DESIGN CAPACITY. THE SPECIFICATIONS PROVIDED THAT IN THE EVENT THE PLANT WAS NOT ABLE TO MEET THE WARRANTED CHARACTERISTICS. FIRM LUMP SUM PRICES WERE REQUIRED FOR CONSTRUCTION OF THE PLANT AND FOR A PERIOD OF TEST OPERATION. BID EVALUATION TO ESTABLISH THE LOW BIDDER IS SPECIFIED BY THE INVITATION AS FOLLOWS: "/A) LUMP SUM PRICE FOR PLANT (ITEM NO. 1.
B-147884, MAR. 29, 1962
TO THE SECRETARY OF THE INTERIOR:
THIS REFERS TO A LETTER DATED JANUARY 4, 1962, FROM YOUR DIRECTOR, OFFICE OF SALINE WATER, WASHINGTON, D. C., REQUESTING OUR DECISION RELATIVE TO THE CONSIDERATION OF THE BID OF THE CHICAGO BRIDGE AND IRON COMPANY FOR PURPOSES OF AWARD UNDER INVITATION FOR BIDS NO. 224, ISSUED BY THE OFFICE OF SALINE WATER, DEPARTMENT OF THE INTERIOR.
THE INVITATION WAS ISSUED ON OCTOBER 10, 1961, FOR THE FURNISHING OF A SALINE WATER CONVERSION DEMONSTRATION PLANT TO BE SITUATED ON A PLOT OF LAND IN THE VICINITY OF ROSWELL, NEW MEXICO, UNDER AUTHORITY CONTAINED IN PUBLIC LAW 85-883 (ENACTED SEPTEMBER 2, 1958). BIDDERS WERE REQUIRED TO INDICATE WARRANTED CONSUMPTION CHARACTERISTICS OF THE EQUIPMENT OFFERED WHICH WOULD BE REQUIRED TO OBTAIN A GUARANTEED OUTPUT OF 1,000,000 GALLONS PER DAY. THE WARRANTY IS STATED IN TERMS OF CONSUMPTION NOT IN EXCESS OF AMOUNTS ENTERED BY THE BIDDER FOR THE FOLLOWING ITEMS: (1) ENERGY INPUT EXCLUSIVE OF ELECTRIC ENERGY PER HOUR OF CONTINUOUS OPERATION AT DESIGN CAPACITY; (2) ELECTRICAL ENERGY CONSUMPTION PER HOUR OF CONTINUOUS OPERATION AT DESIGN CAPACITY; AND (3) CHEMICAL AND RESIN CONSUMPTION PER HOUR OF CONTINUOUS OPERATION AT DESIGN CAPACITY. THE SPECIFICATIONS PROVIDED THAT IN THE EVENT THE PLANT WAS NOT ABLE TO MEET THE WARRANTED CHARACTERISTICS, THE PRICE OF THE PLANT WOULD BE REDUCED BY STIPULATED AMOUNTS (BUT NO MORE THAN 10 PERCENT OF THE PLANT PRICE IN LIQUIDATED DAMAGES WOULD BE LEVIED). FIRM LUMP SUM PRICES WERE REQUIRED FOR CONSTRUCTION OF THE PLANT AND FOR A PERIOD OF TEST OPERATION. BID EVALUATION TO ESTABLISH THE LOW BIDDER IS SPECIFIED BY THE INVITATION AS FOLLOWS:
"/A) LUMP SUM PRICE FOR PLANT
(ITEM NO. 1, SECTION 1.7.2) TIMES 1.88 (1) -----
"/B) LUMP SUM PRICE FOR START-UP
(ITEM NO. 2, SECTION 1.7.2) TIMES 1.88 (1) -----
"/C) BUY AMERICAN ACT TIMES 1.88 (1) -----
"/D) FUEL COST--- TOTAL ENERGY INPUT/SCHEDULE 1.10) (2)
BTU/HR TIMES 175,000 HOURS TIMES $0.63 PER 1,000,000
BTU -----
"/E) ELECTRICAL COST--- TOTAL INPUT (SCHEDULE 1.10) KW TIMES
175,000 HOURS TIMES $0.008 PER KWH -----
"/F) CHEMICAL CONSUMPTION--- (SCHEDULE 1.10) LBS. PER HOUR
TIMES 175,000 HOURS TIMES DOLLARS PER POUND (2) -----
"TOTAL EVALUATED BID PRICE $----
BIDDING SCHEDULE (CONT-D)
(1) A FACTOR OF 1.88 IS USED TO WEIGHT ITEMS A, B AND C TO COVER AMORTIZATION COSTS OF THE INITIAL INVESTMENT AND PROVIDE FOR TAXES AND INSURANCE. AMORTIZATION IS ESTIMATED AT 7.4 PERCENT PER YEAR BASED ON A 20 YEAR PLANT LIFE AND AN ASSUMED 4 PERCENT INTEREST RATE. MAINTENANCE AND INSURANCES ARE ESTIMATED TO BE 2 PERCENT PER YEAR OF THE INITIAL INVESTMENT. THE TOTAL, 9.4 PERCENT PER YEAR, WHEN SUMMED OVER A 20-YEAR PERIOD, AMOUNTS TO 188 PERCENT (1.88).
(2) 175,00 HOURS IS EQUIVALENT TO 20 YEARS.'
AT THE BID OPENING ON DECEMBER 12, 1961, 8 BIDS WERE RECEIVED AND EVALUATED. THE AMOUNTS FOR COMPARISON, ADJUSTED FOR COST FACTORS, INCLUDING WARRANTED CONSUMPTION CHARACTERISTICS, RANGE FROM A LOW OF $6,666,324 TO A HIGH OF $9,977,101. THE AMOUNT OF THE SECOND LOW BID, IS EVALUATED AT $6,749,629, THE THIRD LOW BID IS EVALUATED AT $7,186,382, AND THE ARCHITECT-ENGINEERS' ESTIMATE IS IN THE AMOUNT OF $8,143,785.
THE QUESTION OF THE RESPONSIVENESS OF THE BID SUBMITTED BY THE LOW BIDDER IS THE SUBJECT OF A SEPARATE DECISION TO WALLACE AND TEARS, A COPY OF WHICH IS ENCLOSED.
IT IS FURTHER REPORTED THAT A STUDY OF THE SECOND LOW BID, THAT SUBMITTED BY THE CHICAGO BRIDGE AND IRON COMPANY, LED TO THE SUSPICION THAT THREE MISTAKES MAY HAVE BEEN MADE IN THE WARRANTED CHARACTERISTICS GIVEN IN THE BID. THESE WERE AS TO THE (1) ELECTRICAL ENERGY CONSUMPTION PER OUR; (2) DISSOLVED OXYGEN IN BRACKISH FEED WATER AFTER ION EXCHANGE; AND (3) CALCIUM HARDNESS IN BRACKISH WATER AFTER ION EXCHANGE. THE BIDDER, ON ITS OWN MOTION, INFORMALLY ADVISED THE CONTRACTING OFFICER THAT A MISTAKE WAS MADE WITH REGARD TO ITS QUOTED WARRANTY FOR DISSOLVED OXYGEN (WHICH IT GAVE AS 0.032M1/L. IT WAS ADVISED TO SUBMIT PROOF OF THE MISTAKE IN WRITING. THEREAFTER, BY TELEGRAM OF DECEMBER 19, 1961, THE BIDDER WAS ADVISED TO VERIFY ITS WARRANTY WITH REGARD TO ELECTRICAL ENERGY (GIVEN AS 2,235 KW) AND CALCIUM HARDNESS (GIVEN AS 585 EPM CA), WHICH ARE RELATED TO THE OTHER SUSPECTED ERRORS. BY TELEGRAM OF DECEMBER 21, 1961, THE BIDDER STATED AS FOLLOWS:
"IN RESPONSE TO YOUR TELEGRAM OF DECEMBER NINETEENTH REFERENCE OSW SPECIFICATION 224 ROSWELL, NEW MEXICO WE ADVISE AS FOLLOWS. OUR PROPOSAL COMPLIES WITHOUT EXCEPTION TO YOUR INQUIRY SPECIFICATIONS STOP WARRANTED CHARACTERISTICS 2300 KW FOR COMPRESSOR AND PUMPS PER YOUR TELEGRAM STOP COMPRESSOR REQUIRES 1815 KW OF ABOVE TOTAL STOP ALL KW FIGURES INCLUDE MOTOR AND DRIVE EFFICIENCY FACTORS SO THAT WARRANTED KW ARE BASED ON MOTOR TERMINALS STOP WARRANTED CHARACTERISTICS ION EXCHANGE SEVENTY FIVE PERCENT CALCIUM REMOVAL AT CF4 PRODUCES EFFLUENT ELEVEN POINT SEVEN EPMCA STOP LETTER FOLLOWS CONFIRMING ABOVE IN DETAIL AND PROVIDING CLARIFICATION OF OTHER QUESTIONS YOU RAISED.'
BY SUPPLEMENTAL LETTER OF JANUARY 3, 1962, CHICAGO BRIDGE AND COMPANY REPORTED THAT THE VALUES FOR THE THREE ITEMS IN QUESTION WERE IN ERROR, AND THAT THE CORRECTED VALUES SHOULD BE 2330 KW FOR ELECTRICAL ENERGY, 0.0072 M1/L FOR DISSOLVED OXYGEN; AND 11.7 EPMCA FOR CALCIUM HARDNESS. WITH REGARD TO ELECTRICAL ENERGY, THE BIDDER HAS FURNISHED A COPY OF ITS ORIGINAL WORKSHEET, SHOWING THE MOTOR HORSEPOWER WHICH CONVERTED TO ELECTRICAL ENERGY (ONE HORSEPOWER EQUALS 0.746 KILOWATTS) PRODUCES THE VALUE 2,235 KW ELECTRICAL ENERGY INCLUDED IN ITS BID. IT STATES THAT THE HORSEPOWER VALUES USED REPRESENT BRAKE HORSEPOWER VALUES; AND THAT THE BRAKE HORSEPOWER VALUES SHOULD HAVE BEEN CONVERTED INTO APPLIED HORSEPOWER VALUES AT THE MOTOR TERMINALS. THE MISTAKE WAS IN FORGETTING TO MAKE SUCH CALCULATION. AS TO DISSOLVED OXYGEN, THE MISTAKE WAS IN NOT REPORTING THE VALUE FOR STANDARD CONDITIONS. THE CALCIUM HARDNESS ERROR AROSE BECAUSE OF A SLIDE RULE MISTAKE, AND THE CORRECT ENTRY SHOULD BE 11.7 EPMCA. THE CORRECTED VALUES FOR ELECTRICAL ENERGY AND DISSOLVED OXYGEN ARE SUPPLIED IN WORKSHEET FORM.
THE ADMINISTRATIVE REPORT STATES THAT IF THE BID OF CHICAGO BRIDGE AND IRON COMPANY IS ADJUSTED BY A CHANGE IN THE ELECTRICAL CONSUMPTION FROM THE PRESENT 2235 KW, TO 2330 KW, IT WOULD INCREASE THE BID FOR EVALUATION BY $133,000, RESULTING IN A TOTAL BID OF $6,882,629. THIS WOULD NOT AFFECT THE RELATIVE STANDING OF BIDS SINCE THE THIRD LOW BID IS $7,186,382. UNDER THE LIQUIDATED DAMAGES PROVISION HOWEVER, THERE WOULD BE LESS LIKELIHOOD OF A PRICE REDUCTION. THE ERRORS PERTAINING TO DISSOLVED OXYGEN AND CALCIUM HARDNESS DO NOT AFFECT THE BID EVALUATION.
OUR DECISION IS REQUESTED AS TO WHETHER THE CHICAGO BRIDGE AND IRON COMPANY MAY BE PERMITTED TO CORRECT THE ERRORS IN ITS BID AS INDICATED.
THIS OFFICE HAS NOT OBJECTED TO THE CORRECTION OF A BID AFTER BID OPENING IN THOSE CASES WHERE THE CORRECTION DOES NOT ADVERSELY AFFECT THE RELATIVE STANDING OF THE BIDDERS, AND SATISFACTORY EVIDENCE HAS BEEN PRESENTED TO ESTABLISH THE EXISTENCE OF AN ERROR AS WELL AS THE INTENDED BID. SEE B- 145548, JUNE 20, 1961. IN THIS CASE THE CONTRACTING OFFICE INFORMS US THAT THE BACKUP MATERIAL SUBMITTED AS PART OF THE CHICAGO BRIDGE AND IRON COMPANY BID INDICATES ERROR IN THE ENTRIES ALLEGED TO BE IN ERROR. IT IS FURTHER INDICATED THAT AN ANALYSIS OF THE BACKUP DATA SUBMITTED WITH THE BID SUPPORTS THE FIGURES AS CORRECTED BY THE BIDDER.
THE RECORD BEFORE US APPEARS SATISFACTORILY TO ESTABLISH THAT THE ERRORS ALLEGED BY CHICAGO BRIDGE AND IRON COMPANY WERE IN FACT MADE, AND THE SAME EVIDENCE DEMONSTRATES THE INTENDED FIGURES FOR THE ITEMS INVOLVED. YOU ARE THEREFORE ADVISED THAT WE HAVE NO OBJECTION TO CORRECTION OF SUCH ERRORS AND CONSIDERATION OF THE BID FOR AWARD AS CORRECTED.