B-128471, JUL. 30, 1956

B-128471, JUL. 30, 1956

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 28, 1956, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER CONTRACT NO. DA-20-113-ORD-19880, DATED SEPTEMBER 14, 1955, WITH THE RENTON MACHINE AND WELDING WORKS, RENTON, WASHINGTON, MAY BE RESCINDED IN VIEW OF AN ERROR ALLEGED BY THE COMPANY TO HAVE BEEN MADE IN ITS BID ON WHICH THE CONTRACT WAS AWARDED.

BY INVITATION NO. ORD 20-113-56-42, THE ORDNANCE TANK-AUTOMOTIVE COMMAND, DETROIT, MICHIGAN, REQUESTED BIDS--- TO BE OPENED AUGUST 15, 1955--- FOR THE MANUFACTURE AND DELIVERY OF 430 RINGS IN ACCORDANCE WITH THE GOVERNMENT'S DRAWINGS. IN RESPONSE MR. H. W. ERICKSON, D/B/A RENTON MACHINE AND WELDING WORKS, SUBMITTED A BID OFFERING TO FURNISH THE RINGS AT A PRICE OF $18 EACH. THE NINE OTHER RESPONSIVE BIDDERS SPECIFIED PRICES RANGING FROM $44 EACH TO $142 EACH. THE GOVERNMENT'S ESTIMATE OF THE COST OF THE RINGS WAS $141 EACH.

THE RECORD INDICATES THAT THE CONTRACTING OFFICER REQUESTED THESAN FRANCISCO ORDNANCE DISTRICT, OAKLAND, CALIFORNIA, BY LETTER DATED AUGUST 15, 1955, TO CONDUCT A PRE-AWARD SURVEY OF THE ABILITY OF THE RENTON MACHINE AND WELDING WORKS TO PERFORM THE CONTRACT AND TO HAVE THE COMPANY CONFIRM ITS BID PRICE OF $18 EACH ON THE RINGS AND TO FURTHER CONFIRM THE SIGNATURE ON ITS BID. BY TELETYPE DATED SEPTEMBER 1, 1955, THE SAN FRANCISCO ORDNANCE DISTRICT ADVISED THE ORDNANCE TANK AUTOMOTIVE COMMAND THAT THE RENTON MACHINE AND WELDING WORKS HAD CONFIRMED ITS BID PRICE OF $18 EACH FOR THE RINGS AND THAT, ON THE BASIS OF THE SURVEY MADE BY THEM, AN AWARD TO THE COMPANY WAS RECOMMENDED. THE BID OF THE RENTON MACHINE AND WELDING WORKS WAS ACCEPTED ON SEPTEMBER 14, 1955, AND ON SEPTEMBER 28, 1955, THE CONTRACT WAS FORWARDED TO THE SAN FRANCISCO ORDNANCE DISTRICT FOR ADMINISTRATION BY THE ORDNANCE TANK-AUTOMOTIVE COMMAND.

BY LETTER DATED SEPTEMBER 29, 1955, IN WHICH HE REQUESTED THAT HE BE RELIEVED FROM PERFORMANCE OF THE CONTRACT, MR. ERICKSON, THE OWNER OF RENTON MACHINE AND WELDING WORKS, ADVISED THAT, UPON RECEIPT OF THE INVITATION, HE TURNED IT OVER TO HIS SUBCONTRACTOR, N AND S TOOL AND DIE COMPANY, FOR A QUOTATION ON THE RINGS, WITH THE UNDERSTANDING THAT IF THE COMPANY'S BID WAS ACCEPTED IT WOULD ASSIST WITH THE MACHINING; THAT HIS SUBCONTRACTOR QUOTED A PRICE OF $16 EACH FOR THE RINGS AND THAT TO THIS PRICE HE ADDED THE SUM OF $2 TO COVER THE POSSIBILITY OF AN EMERGENCY BEFORE SUBMITTING HIS BID; THAT AFTER AWARD OF THE CONTRACT HIS SUBCONTRACTOR NOTIFIED HIM THAT IT COULD NOT MANUFACTURE THE RINGS AT A PRICE OF $16 EACH, AND THAT UPON CHECKING THE SPECIFICATIONS, HE DISCOVERED THAT IT WOULD COST APPROXIMATELY $65 TO $70 TO MANUFACTURE ONE RING. IN LETTERS DATED OCTOBER 19 AND NOVEMBER 4, 1955, MR. ERICKSON REITERATED HIS REQUEST THAT THE CONTRACT BE RESCINDED AND STATED THAT HE DID NOT POSSESS THE NECESSARY EQUIPMENT TO MANUFACTURE THE REQUIRED RINGS AND THAT PERFORMANCE OF SUCH CONTRACT WOULD RESULT IN FINANCIAL HARDSHIP. MR. ERICKSON ALSO STATED THAT NO WORK WAS DONE ON THE CONTRACT OR MATERIAL ORDERED PRIOR TO GIVING NOTICE OF A MISTAKE, AND THAT HE HAD ESTIMATED THE COST OF MANUFACTURING THE RINGS, EXCLUSIVE OF PROFIT OR ALLOWANCE FOR SPOILAGE OR EMERGENCIES, AS BEING $69.20 EACH.

BY LETTER DATED NOVEMBER 4, 1955, THE RENTON MACHINE AND WELDING WORKS ADVISED THE SUCCESSOR CONTRACTING OFFICER THAT THE COMPANY COULD NOT PERFORM UNDER THE CONTRACT. BY LETTER DATED DECEMBER 2, 1955, THE SUCCESSOR CONTRACTING OFFICER ADVISED THE COMPANY THAT PURSUANT TO PARAGRAPH 11 OF THE CONTRACT ITS RIGHT TO PROCEED WITH THE PERFORMANCE OF THE CONTRACT WAS TERMINATED. SUBSEQUENTLY A REPLACEMENT CONTRACT FOR A SMALLER QUANTITY OF THE SAME RINGS WAS ENTERED INTO WITH ANOTHER COMPANY AT AN EXCESS COST TO THE GOVERNMENT OF $7,281.60.

IT APPEARS THAT MR. ERICKSON CONTENDS THAT, AT THE TIME ORDNANCE REPRESENTATIVES CHECKED ON HIS FACILITIES FOR MANUFACTURING THE RINGS, HE HAD JUST RETURNED FROM A FOUR-WEEK TRIP AND THAT HE WAS NOT FAMILIAR WITH WHAT HAD PREVIOUSLY TRANSPIRED; THAT MR. MCKINNEY, WHO WAS AUTHORIZED TO SIGN AND SUBMIT THE BID IN HIS ABSENCE, WAS NOT IN THE OFFICE AT THE TIME OF THE PRE-AWARD SURVEY; THAT MR. MCKINNEY HAD NOT PREVIOUSLY EXPLAINED THE MATTER IN DETAIL TO HIM; THAT HE NATURALLY ASSUMED THAT THE PLAN WAS TO MANUFACTURE THE RINGS IN THE USUAL MANNER AND THAT ALL PERTINENT DETAILS HAD BEEN SATISFACTORILY ADJUSTED; AND THAT IF HE HAD BEEN PRESENT AT THE TIME THE BID WAS BEING MADE IN ALL PROBABILITY HE WOULD HAVE CHECKED THE DRAWING AND PREVENTED SUCH A LOW PRICE FROM BEING SUBMITTED. IN REGARD TO THE PRE-AWARD SURVEY, MR. H. E. BAKER--- SUPERVISORY INDUSTRIAL ENGINEER, SEATTLE REGIONAL OFFICE, SAN FRANCISCO ORDNANCE DISTRICT, STATES IN A CERTIFICATION DATED JANUARY 13, 1956, AS FOLLOWS:

"I CERTIFY:

THAT THE SURVEY WAS CONDUCTED AS A RUSH JOB IN ACCORDANCE WITH THE REQUEST; THAT AT THE TIME THE ENGINEER VISITED THE CONTRACTOR'S PLANT HE DID NOT HAVE THE DRAWINGS AND THAT THE CONTRACTOR DID NOT HAVE THE DRAWINGS; THAT THE CONTRACTOR'S EMPLOYEE WHO MADE THE BID WAS NOT PRESENT, THAT NEITHER HE, THE ENGINEER, NOR THE CONTRACTOR CHECKED THE CONTRACTOR'S BID, THAT THERE WAS NO DATA AVAILABLE TO THEM TO INDICATE THAT THE CONTRACTOR'S BID WAS LOW OR ANY AREA IN WHICH AN ERROR HAD BEEN MADE IN THE BID; AND THAT BECAUSE OF THE LACK OF DRAWINGS THE INADEQUACY OF THE CONTRACTOR'S FACILITIES WAS NOT APPARENT.'

WHILE IT APPEARS THAT PRIOR TO AWARD, THE RENTON MACHINE AND WELDING WORKS VERBALLY CONFIRMED ITS BID PRICE ON THE RINGS, IT DOES NOT APPEAR THAT IN REQUESTING CONFIRMATION THROUGH THE SAN FRANCISCO ORDNANCE DISTRICT THE CONTRACTING OFFICER GAVE ANY INDICATION OF THE REASONS WHICH LEAD HIM TO SUSPECT AN ERROR. IT MAY BE QUESTIONED WHETHER IN THESE CIRCUMSTANCES THE BARE CONFIRMATION OF THE PRICE WAS SUFFICIENT TO OVERCOME THE DOUBT RAISED BY THE WIDE DISCREPANCY IN PRICE. THE CONTRACTING OFFICER WAS ENTITLED TO RELY UPON SAN FRANCISCO ORDNANCE DISTRICT'S DETERMINATION THAT THE COMPANY WAS TECHNICALLY, FINANCIALLY AND MECHANICALLY CAPABLE OF PRODUCING THE REQUIRED RINGS, BUT, SINCE IT HAS BEEN DETERMINED THAT SUCH DETERMINATION WAS FAULTY, THERE IS SOME GROUND FOR CONSIDERING THE GOVERNMENT TO HAVE BEEN AS MUCH AT FAULTAS THE BIDDER.

IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CONTRACT WAS NOT LEGALLY ENFORCEABLE. IT FOLLOWS THAT THE INDEBTEDNESS FOR EXCESS COSTS STATED AGAINST THE RENTON MACHINE AND WELDING WORKS SHOULD BE CANCELLED.