B-127778, JUN. 6, 1956

B-127778, JUN. 6, 1956

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTER DATED MAY 1, 1956, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, RELATIVE TO AN ALLEGED ERROR IN A BID DATED DECEMBER 14, 1955, SUBMITTED BY BERKELEY STEEL CONSTRUCTION CO., INC., ON WHICH CONTRACT NO. 14-06-D-1720 DATED JANUARY 13, 1956, WAS BASED. YOU REQUEST A DECISION AS TO WHETHER AN INCREASE IN THE CONTRACT PRICE FROM $60,980 TO $74,365, AS PROPOSED BY THE CONTRACTOR, PROPERLY MAY BE GRANTED.

BY INVITATION NO. (D) H-33,257-A DATED DECEMBER 2, 1955, THE BUREAU OF RECLAMATION, DENVER FEDERAL CENTER, DENVER, COLORADO, REQUESTED BIDS TO BE OPENED DECEMBER 16, 1955, FOR FURNISHING LOUVER METAL WORK FOR FISH COLLECTING FACILITIES, DELTA-MENDOTA CANAL INTAKE, CENTRAL VALLEY PROJECT, AS CALLED FOR UNDER SCHEDULE 1, CONSISTING OF ITEMS 1, 2, AND 3. EACH ITEM COVERED ONE LOT OF WORK TO BE PERFORMED IN ACCORDANCE WITH CERTAIN DESIGNATED DRAWINGS FURNISHED BY THE GOVERNMENT. THE BIDDERS WERE REQUESTED, AMONG OTHER THINGS, NOT ONLY TO QUOTE A PRICE FOR THE MATERIAL AND SERVICES CALLED FOR UNDER EACH ITEM, BUT TO STATE THE SHIPPING WEIGHT OF THE MATERIALS TO BE FURNISHED AND TO SPECIFY THE NUMBER OF DAYS AFTER RECEIPT OF NOTICE OF AWARD WITHIN WHICH COMPLETE SHIPMENT WOULD BE MADE. THEY WERE INFORMED ON PAGE 4 OF THE INVITATION THAT TIME OF DELIVERY WAS IMPORTANT; THAT COMPLETE SHIPMENT WITHIN 90 DAYS AFTER NOTICE OF AWARD WAS DESIRED; AND THAT, BY REASON THEREOF, IN EVALUATING THE BIDS $35 WOULD BE ADDED TO THE AMOUNT THEREOF FOR EACH DAY THE DELIVERY OFFER WAS IN EXCESS OF THE DESIRED DELIVERY TIME. IN THIS CONNECTION, THE INVITATION PROVIDED FURTHER THAT LIQUIDATED DAMAGES OF $35 PER DAY WOULD BE ASSESSED FOR EACH DAY DELIVERY WAS DELAYED BEYOND THE NUMBER OF DAYS WITHIN WHICH DELIVERY WAS OFFERED IN THE CONTRACTOR'S BID. ALSO, THE BIDDERS WERE INFORMED THAT, FOR THE PURPOSE OF COMPARISON, THE BIDS WOULD BE EVALUATED ON THE BASIS OF THE COST TO THE GOVERNMENT AFTER RECONCILING APPLICABLE DISCOUNTS AND TRANSPORTATION CHARGES WHERE SUCH ARE INVOLVED.

THE BERKELEY STEEL CONSTRUCTION CO., INC., SUBMITTED A BID IN WHICH IT OFFERED TO COMPLETE SHIPMENT WITHIN THE DESIRED 90-DAY PERIOD. THE SHIPPING WEIGHT OF THE MATERIAL TO BE FURNISHED AND THE BID PRICE F.O.B. SOURCE, FOR EACH ITEM OF SCHEDULE 1, WERE STATED IN ITS BID AS FOLLOWS:

CHART

GUARANTEED BID PRICE

ITEM SHIPPING WEIGHT PER LOT OR ITEM

1 285,000 LBS. $54,200

2 29,280 LBS. 6,290

3 970 LBS. 490

AGGREGATE 315,250 LBS. $60,980

THE CORPORATION'S BID, LESS DISCOUNT OFFERED, AND PLUS THE APPLICABLE ESTIMATED TRANSPORTATION COST OF $507.55 WAS, FOR THE PURPOSE OF COMPARISON, $61,182.65, THE LOWEST RECEIVED. IT WAS ACCEPTED ON JANUARY 13, 1956. THE ABSTRACT OF BIDS SHOWS THAT THE NINE OTHER BIDS RECEIVED AND RECONCILED FOR COMPARISON RANGED FROM $86,385.13 TO $206,445.52.

BY LETTER DATED FEBRUARY 23, 1956, THE CORPORATION ADVISED THAT IT HAD MADE AN ERROR IN COMPUTING ITS BID PRICE AND THAT, EXCEPT FOR THE ERROR ITS BID PRICE WOULD HAVE BEEN $26,770 HIGHER, OR $87,750 INSTEAD OF $60,980. IT STATED, IN SUBSTANCE, THAT IN ORDER TO INCLUDE A PROPER ADDITIONAL AMOUNT FOR GENERAL OVERHEAD, SHOP BURDEN, AND OTHER INDIRECT COSTS, IN FIGURING ITS BID PRICES FOR JOBS OF THE KIND HERE INVOLVED, PURSUANT TO ITS NORMAL COST-ACCOUNTING PROCEDURE, IT CUSTOMARILY DOUBLED THE SHOP LABOR COST AS DETERMINED BY ITS SHOP SUPERINTENDENT, ADDED THE COST OF MATERIAL, AND THEN ADDED 10 PERCENT OF THE AMOUNT SO OBTAINED FOR PROFIT. HOWEVER, IN THE INSTANT CASE, IT CLAIMS THAT THROUGH INADVERTENCE IT FAILED TO ADD THE CUSTOMARY EXTRA ITEM OF 100 PERCENT OF THE ESTIMATED DIRECT LABOR COST AND, AS A RESULT, THE BID WAS $26,770 LESS THAN IT SHOULD HAVE BEEN. ON THE BASIS OF THE VERIFIED STATEMENTS CONTAINED IN ITS LETTER AND THE SUPPORTING DOCUMENTARY EVIDENCE FORWARDED THEREWITH, IT REQUESTS THAT THE CONTRACT PRICE BE INCREASED BY $13,385, OR FROM $60,980 TO $74,365, TO COVER, IN PART ONLY, THE GENERAL OVERHEAD, SHOP BURDEN, AND OTHER GENERAL INDIRECT COSTS FOR WHICH ITS INTENDED CHARGE OF $26,770 WAS ENTIRELY OMITTED IN COMPUTING THE PRICE THAT WAS QUOTED IN ITS BID. THE REFERRED-TO SUPPORTING EVIDENCE CONTAINS THE BIDDER'S VERIFIED BID ESTIMATE SHEETS FOR SEVERAL OTHER BIDS RECENTLY FIGURED ON DIFFERENT CONTRACT JOBS IN EACH OF WHICH THE ALLEGED CUSTOMARY METHOD OF INCORPORATING AN ADDITIONAL CHARGE FOR GENERAL OVERHEAD, SHOP BURDEN, AND OTHER INDIRECT COSTS WAS FOLLOWED. ALSO, THE BIDDER FORWARDED ITS ORIGINAL WORKSHEETS, SWORN TO AS SUCH, ON WHICH ITS BID IN THE INSTANT CASE WAS COMPUTED. BY THESE DOCUMENTS IT HAS REASONABLY ESTABLISHED THAT ITS COST-ACCOUNTING PROCEDURE WAS AS ALLEGED AND THAT A BONA FIDE ERROR WAS MADE IN ITS BID AND THAT, EXCEPT FOR THE ERROR, ITS BID WOULD HAVE BEEN HIGHER TO THE EXTENT AS ALLEGED.

IT IS NOTED THAT THE MAJORITY OF THE OTHER BIDS WERE FROM TWO TO THREE TIMES HIGHER THAN THE CONTRACTOR'S BID, NOTWITHSTANDING THAT THE TIME REQUIRED FOR DELIVERY IN MOST OF SUCH BIDS WAS APPROXIMATELY TWICE AS LONG AS THE DESIRED 90-DAY PERIOD. ON THE OTHER HAND, THE CONTRACTOR OFFERED DELIVERY WITHIN THE DESIRED 90-DAY PERIOD AT A PRICE MORE THAN $25,000 LESS THAN THE NEXT-LOWEST BID. IN VIEW THEREOF, AND SINCE ALL BIDS EXCEEDED THE ESTIMATE OF $60,000 MADE BY THE GOVERNMENT'S ENGINEERS--- MOST OF THEM BY VERY SUBSTANTIAL AMOUNTS -- IT APPEARS THAT THE CONTRACTING OFFICER SHOULD HAVE TAKEN NOTICE OF THE PROBABILITY THAT THE CONTRACTOR HAD MADE AN ERROR IN SUBMITTING A BID SO MUCH LOWER THAN THE OTHERS RECEIVED. THEREFORE, THE CONCLUSION IS WARRANTED THAT THE CONTRACTOR SHOULD HAVE BEEN AFFORDED AN OPPORTUNITY TO VERIFY ITS BID BEFORE IT WAS ACCEPTED. SINCE THIS WAS NOT DONE, THERE WOULD APPEAR TO BE A SOUND BASIS FOR AUTHORIZING THE LIMITED RELIEF REQUESTED BY THE CONTRACTOR IN THIS CASE.

ACCORDINGLY, THE CONTRACT MAY BE AMENDED TO PROVIDE FOR THE REQUESTED INCREASE OF $13,385 IN THE CONTRACT PRICE, OR FROM $60,980 TO $74,365, F.O.B. RAILROAD CARS AT BERKELEY, PROVIDING THAT ALL OTHER TERMS AND CONDITIONS OF THE CONTRACT SHALL REMAIN UNCHANGED--- SUCH PRICE BEING SUBSTANTIALLY LESS THAN THE NEXT-LOWEST BID RECEIVED IN THIS CASE.

A REFERENCE TO THIS DECISION SHOULD BE MADE ON THE AMENDMENT TO THE CONTRACT.

ALL PAPERS FORWARDED WITH YOUR LETTER OF MAY 1, 1956, EXCEPT THE COPY OF A MEMORANDUM DATED APRIL 9, 1956, FROM THE CONTRACTING OFFICER TO THE COMMISSIONER, ARE RETURNED HEREWITH, AS REQUESTED.