B-128316, JULY 13, 1956, 36 COMP. GEN. 27

B-128316, JULY 13, 1956, 36 COMP. GEN. 27

CONTRACTS - MISTAKES - PRICE VERIFICATION - CONTRACTOR'S LIABILITY THE ACCEPTANCE OF A BID AFTER THE BIDDER HAD BEEN AFFORDED TWO OPPORTUNITIES TO VERIFY THE BID, AND HAD UNEQUIVOCALLY AFFIRMED THE BID PRICE, CONSUMMATED A VALID AND BINDING CONTRACT WHICH CANNOT BE CANCELED ON THE SUBSEQUENT ALLEGATION OF ERROR.

TO THE SECRETARY OF THE ARMY, JULY 13, 1956:

REFERENCE IS MADE TO A LETTER DATED JUNE 18, 1956, WITH ENCLOSURES, FROM THE DEPUTY ASSISTANT SECRETARY OF THE ARMY ( LOGISTICS), REQUESTING A DECISION AS TO WHETHER CONTRACT NO. DA 11-009-QM-25293, DATED JANUARY 24, 1956, WITH THE BON MARCHE, WHOLESALE CONTRACT DIVISION, SEATTLE, WASHINGTON, MAY BE CANCELED IN VIEW OF AN ERROR ALLEGED BY THE CONTRACTOR TO HAVE BEEN MADE IN ITS BID ON WHICH THE CONTRACT WAS AWARDED.

THE RECORD FURNISHED SHOWS THAT THE CHICAGO QUARTERMASTER PURCHASING CENTER, CHICAGO, ILLINOIS, BY INVITATION NO. QM11-009-56-165 REQUESTED BIDS--- TO BE OPENED DECEMBER 22, 1955--- FOR FURNISHING 2,973 OCCASIONAL CHAIRS, WITH ARMS, TO BE MANUFACTURED IN ACCORDANCE WITH CERTAIN GOVERNMENT SPECIFICATIONS. IN RESPONSE THE BON MARCHE SUBMITTED A BID DATED DECEMBER 12, 1955, OFFERING TO FURNISH THE CHAIRS AT A PRICE OF $23.65 EACH. FIVE OTHER BIDDERS ON THE CHAIRS SPECIFIED PRICES RANGING FROM $29.15 TO $38.50 EACH.

THE CONTRACTING OFFICER REPORTS THAT, SINCE THE BID OF THE BON MARCHE APPEARED TO BE OUT OF LINE WITH THE OTHER BIDS RECEIVED ON THE CHAIRS, AND BECAUSE THE CORPORATION HAD FAILED TO FURNISH THE STREET ADDRESS OF ITS SUBCONTRACTOR, THE CORPORATION WAS REQUESTED BY TELEGRAM DATED DECEMBER 22, 1955, TO VERIFY ITS BID AND TO FURNISH THE REQUIRED ADDRESS. THE CORPORATION ADVISED BY TELEGRAM DATED DECEMBER 22, 1955, THAT ITS BID PRICE OF $23.65 EACH WAS THE CORRECT PRICE FOR THE CHAIRS AND SUPPLIED THE ADDRESS OF ITS SUBCONTRACTOR. NOTWITHSTANDING THIS VERIFICATION THE CONTRACTING OFFICER WAS STILL NOT SATISFIED THAT A MISTAKE HAD NOT BEEN MADE IN ITS BID, WHICH HE BELIEVED TO BE AT A PRICE BELOW THE MANUFACTURING COST. FURTHER EXAMINATION OF THE CORPORATION'S BID DISCLOSED THAT IT HAD REPRESENTED THE SHIPPING WEIGHT OF THE CHAIR BID UPON TO BE 23 POUNDS, WHILE THE EXPERIENCE OF THE CHICAGO QUARTERMASTER PURCHASING CENTER INDICATED THE SHIPPING WEIGHT OF A SPECIFICATION CHAIR TO BE 30 TO 35 POUNDS. SUSPECTING THAT THE BIDDER OR HIS SUBCONTRACTOR HAD PREDICATED ITS PRICE UPON A MISUNDERSTANDING OF THE SPECIFICATIONS, THE OFFICER AGAIN REQUESTED THE CORPORATION TO VERIFY ITS BID, BY TELEGRAM OF DECEMBER 28, 1955, READING AS FOLLOWS:

REFERENCE YOUR TELEGRAM DATED 22 DEC 55 VERIFYING PRICE BID ON INVITATION FOR BIDS NO. QM11-009-56-165. IN ORDER TO INSURE THAT NO MISTAKE IN BID HAS BEEN MADE REQUEST YOU RECHECK REQUIREMENTS OF INVITATION AND SPECIFICATION APPLICABLE TO SUCH REQUIREMENTS. REASON FOR THIS REQUEST ARISES FROM FACT YOU SHOW A SHIPPING WEIGHT OF 23 LBS. EACH FOR THE CHAIR WHEREAS EXPERIENCE INDICATES A CHAIR WEIGHS APPROXIMATELY 30-35 LBS. PRIOR TO PACKING WHICH MAY MEAN SOME DESIGN OR MATERIAL FACTOR MAY NOT HAVE BEEN CONSIDERED IN PREPARATION OF YOUR BID. FURTHER, HAS FACTORY WHERE CHAIR IS TO BE PRODUCED REVIEWED SPECIFICATION REQUIREMENTS?

BY TELEGRAM DATED DECEMBER 29, 1955, THE CORPORATION REPLIED AS FOLLOWS:

REFERENCE YOUR TELEGRAM DECEMBER 28 QM11-009-56-165 SHIPPING WEIGHT EACH CHAIR 30 LBS PACKED TWO CHAIRS PER CARTON WEIGHING APPROXIMATELY 65 LBS. PACKED. CALIFORNIA CHAIR HAS SPECIFICATION REQUIREMENTS. RECHECKED AND WILL FURNISH AS PER DELIVERY SCHEDULE AND SPECIFICATIONS.

ON JANUARY 24, 1956, AWARD WAS MADE TO THE BON MARCHE IN ACCORDANCE WITH ITS BID.

ON FEBRUARY 20, 1956, NEARLY A MONTH AFTER AWARD, A REPRESENTATIVE OF THE BON MARCHE ADVISED BY TELEPHONE THAT ITS BID PRICE OF $23.65 EACH FOR THE CHAIRS WAS ERRONEOUS IN THAT IT WAS BASED ON A CHAIR WHICH DID NOT MEET THE REQUIREMENTS OF THE SPECIFICATIONS; THAT THE CORPORATION'S SUBCONTRACTOR, CALIFORNIA CHAIRS, INC., HAD DISCOVERED, AFTER THE VISIT OF A GOVERNMENT INSPECTOR, THAT THE SPECIFICATIONS WERE MORE EXACTING THAN IT HAD BELIEVED THEM TO BE; AND THAT ITS SUBCONTRACTOR HAD ALSO INDICATED THAT IT COULD NOT MANUFACTURE THE REQUIRED CHAIRS FOR THE PRICE QUOTED TO THE CORPORATION. IN SUPPORT OF THE ALLEGATION OF ERROR, THE CORPORATION'S SUBCONTRACTOR SUBMITTED ITS ORIGINAL ESTIMATE SHEET WHICH SHOWS COSTS OF $19.33 FOR EACH CHAIR AND A REVISED ESTIMATE SHEET WHICH SHOWS COSTS OF $30.45 FOR EACH CHAIR. BY LETTER DATED MAY 3, 1956, THE BON MARCHE REQUESTED CANCELLATION OF THE CONTRACT.

AFTER CONSIDERABLE CORRESPONDENCE HAD PASSED BETWEEN THE CORPORATION AND THE CONTRACTING OFFICER RELATING TO THE SUBCONTRACTOR'S ERROR AND TO THE LACK OF PROGRESS IN THE PERFORMANCE OF THE CONTRACT, THE CONTRACTING OFFICER ADVISED THE CORPORATION BY LETTER DATED MAY 24, 1956, IN PERTINENT PART, AS FOLLOWS:

BY REASON OF THE FACT THAT THE SUPPLIES COVERED BY YOUR CONTRACT ARE URGENTLY NEEDED BY THE GOVERNMENT AND YOU HAVE INDICATED THAT YOU WILL NOT BE ABLE TO SUPPLY THE SAME, AND BY REASON OF THE FURTHER FACT THAT SAID CONTRACT IS, AS OF TODAY, WHOLLY IN DEFAULT, THE UNDERSIGNED FINDS IT NECESSARY TO TERMINATE THE SAME PURSUANT TO THE DEFAULT PROVISIONS THEREOF WITHOUT AWAITING ACTION ON YOUR REQUEST FOR CANCELLATION. A FORMAL NOTICE OF SUCH TERMINATION IS INCLOSED HEREWITH. SUCH NOTICE DOES NOT CONSTITUTE A DENIAL OF YOUR REQUEST FOR CANCELLATION, WHICH WILL BE ACTED UPON BY HIGHER AUTHORITY IN DUE COURSE AND IN THE EVENT THAT CANCELLATION IS AUTHORIZED, THE SAME WILL BE ACCOMPLISHED AND ALL ACTION TAKEN PURSUANT TO THE CONTRACT, INCLUDING THE ISSUANCE OF THE INCLOSED NOTICE OF TERMINATION FOR DEFAULT, WILL BE CONSIDERED A NULLITY. IN THIS MANNER THE GOVERNMENT WILL BE IN A POSITION TO OBTAIN NEEDED SUPPLIES WITHOUT PREJUDICING ANY RIGHTS YOU MIGHT OTHERWISE HAVE TO RELIEF FROM YOUR OBLIGATIONS UNDER THE CONTRACT BY VIRTUE OF A MISTAKE IN BID.

THE PRIMARY QUESTION FOR CONSIDERATION IS NOT WHETHER AN ERROR WAS MADE IN THE BID, BUT WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY THE ACCEPTANCE THEREOF. THE INVITATION ISSUED IN THE PRESENT CASE WAS CLEAR AND UNAMBIGUOUS AS TO THE NEEDS OF THE GOVERNMENT. THE RESPONSIBILITY FOR THE PREPARATION OF THE BID SUBMITTED IN RESPONSE TO THE INVITATION WAS UPON THE BIDDER. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.1CLS. 120, 163, WHEREIN THE COURT OF CLAIMS STATED:

* * * THE PARTIES ARE DEALING AT ARMS LENGTH AND BIDDERS ARE PRESUMED TO BE QUALIFIED TO ESTIMATE THE PRICE AT WHICH THEY CAN PERFORM THE WORK SPECIFIED AT A REASONABLE PROFIT. IF THEY FAIL TO DO SO, AS PLAINTIFF DID IN THIS CASE, THE GOVERNMENT CANNOT FOR THAT REASON BE HELD FOR THE RESULTING LOSS.

ANY ERROR THAT WAS MADE IN THE BID OF THE CORPORATION WAS UNILATERAL -- NOT MUTUAL--- AND, THEREFORE, DOES NOT ENTITLE THE CORPORATION TO RELIEF. SEE OGDEN AND DOUGHERTY V. UNITED STATES, 102 C.1CLS. 249; AND SALIGMAN ET AL. V. UNITED STATES, 56 F.1SUPP. 505. SEE ALSO, 20 COMP. GEN. 652, AND 26 ID. 415.

AT THE TIME THE BIDS IN THIS CASE WERE OPENED, THERE WAS SOME DOUBT ON THE PART OF THE CONTRACTING OFFICER AS TO THE CORRECTNESS OF THE BID SUBMITTED BY THE BON MARCHE AND THE CORPORATION WAS REQUESTED TO VERIFY ITS BID. ALTHOUGH THE CORPORATION IMMEDIATELY CONFIRMED ITS BID PRICE OF $23.65, THE CONTRACTING OFFICER STILL SUSPECTED THAT A MISTAKE HAD BEEN MADE IN THE BID, AND BY A SECOND TELEGRAM IN WHICH HE SET FORTH THE BASES FOR HIS SUSPICION, HE SPECIFICALLY REQUESTED THE CORPORATION TO RECHECK REQUIREMENTS OF THE INVITATION AND SPECIFICATIONS APPLICABLE THERETO IN ORDER TO INSURE THAT NO MISTAKE IN BID HAD BEEN MADE. THE CORPORATION WAS ALSO ASKED THE QUESTION "HAS FACTORY WHERE CHAIR IS TO BE PRODUCED REVIEWED SPECIFICATION REQUIREMENTS? " AFTER THE SECOND UNEQUIVOCAL VERIFICATION OF THE BID, THE CONTRACTING OFFICER WAS NOT ONLY JUSTIFIED IN AWARDING THE CONTRACT ON THE CORPORATION'S BID AS THE LOWEST RECEIVED, BUT WOULD HAVE FAILED IN HIS DUTY HAD HE DONE OTHERWISE. SEE CARNEGIE STEEL COMPANY V. CONNELLY, 89 N.J.L., 97 A. 774; SHRIMPTON MFG. COMPANY V. BRIN, 59 TEX. CIV. APP. 352, 125 S.W. 942; AND ALABAMA SHIRT AND TROUSER COMPANY V. UNITED STATES, 121 C.1CLS. 313. THE FACT THAT THE CORPORATION'S BID WAS NOT ACCEPTED UNTIL IT HAD BEEN OFFERED TWO OPPORTUNITIES TO CHECK ITS BID, AND HAD TWICE AFFIRMED IT, PRECLUDES ANY ASSUMPTION THAT THE CONTRACTING OFFICER EXERCISED BAD FAITH OR ATTEMPTED TO TAKE ADVANTAGE OF THE CORPORATION. SEE 27 COMP. GEN. 17.

IN THAT REGARD, THE CONTRACTING OFFICER HAS STATED THAT AFTER THE SECOND VERIFICATION HE HAD NO FURTHER DOUBT AS TO THE ACCURACY OF THE BID, SINCE EXPERIENCE HAS DEVELOPED THAT THERE ARE OCCASIONS WHEN BIDDERS WILL ACCEPT A CONTRACT AT OR BELOW COST IN ORDER TO KEEP IN OPERATION DURING SLACK SEASONS OR BETWEEN OPERATIONS ON OTHER CONTRACTS, THEREBY ENABLING THEM TO RETAIN THEIR TRAINED PERSONNEL, ON THE THEORY THAT THE LOSS FROM CONTINUED OPERATION WOULD BE LESS THAN THE LOSS FROM A SUSPENSION OF OPERATIONS. THE PRESENT RECORD FULLY ESTABLISHES THAT THE ACCEPTANCE OF THE CORPORATION'S BID WAS IN GOOD FAITH--- NO ERROR HAVING BEEN ALLEGED UNTIL AFTER AWARD--- AND IN SUCH CIRCUMSTANCES, CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO. SEE UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313; AND AMERICAN SMELTING AND REFINING COMPANY V. UNITED STATES, 259 U.S. 75.

UPON ACCEPTANCE OF THE CORPORATION'S BID, THE RIGHT VESTED IN THE GOVERNMENT TO RECEIVE PERFORMANCE STRICTLY IN ACCORDANCE WITH ITS TERMS, AND, IN THE ABSENCE OF A STATUTE SPECIFICALLY SO PROVIDING, NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO GIVE AWAY OR SURRENDER THAT RIGHT WITHOUT ADEQUATE CONSIDERATION. SIMPSON V. UNITED STATES, 172 U.S. 372; UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 C.1CLS. 327, 335; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 ID. 584, 607. THE LAW DOES NOT AUTHORIZE THE WAIVER OF VESTED CONTRACT RIGHTS BY REASON OF THE HARDSHIP IMPOSED UPON A CONTRACTOR IN CIRCUMSTANCES SUCH AS THOSE HERE INVOLVED. CHOUTEAU V. UNITED STATES, 95 U.S. 61; DAY V. UNITED STATES, 245 U.S. 159, 161. SEE, ALSO, 22 COMP. GEN. 260, 261.

ACCORDINGLY, ON THE BASIS OF THE PRESENT RECORD, THERE APPEARS TO BE NO LEGAL BASIS FOR OUR OFFICE TO AUTHORIZE CANCELLATION OF CONTRACT NO. DA 11 -009-QM-25293, OR TO INCREASE THE CONSIDERATION SPECIFIED THEREIN.

ONE SET OF THE PAPERS IN THE CASE IS BEING RETAINED. THE OTHER PAPERS ARE RETURNED.