B-129509, DEC. 31, 1956

B-129509, DEC. 31, 1956

TO RONSON ART METAL WORKS, INCORPORATED:

REFERENCE IS MADE TO A LETTER OF AUGUST 6, 1956, AND ENCLOSURES, IN YOUR BEHALF, FROM MR. SANFORD H. BOLZ, REQUESTING REVIEW OF SETTLEMENT DATED NOVEMBER 3, 1954, WHEREIN THERE WAS DISALLOWED YOUR CLAIM FOR $51,957 UNDER CONTRACT NO. DA-36-034-ORD-489M WITH THE DEPARTMENT OF THE ARMY.

IT APPEARS THAT IN RESPONSE TO A REQUEST OF THE PHILADELPHIA ORDNANCE DISTRICT, DEPARTMENT OF THE ARMY, FOR PROPOSALS, YOU SUBMITTED A BID DATED AUGUST 13, 1951, OFFERING TO FURNISH 502,000 GRENADE PROJECTION ADAPTER UNITS AT $29.349 PER 100 UNITS, OR FOR A TOTAL CONTRACT PRICE OF $147,331.98. THERE ACCOMPANIED YOUR BID WD FORM 105A, SHOWING A COST ANALYSIS BREAKDOWN OF THE VARIOUS COMPONENT PARTS OF YOUR BID. SUBSEQUENT CHANGE IN THE DEPARTMENT OF THE ARMY'S SPECIFICATIONS RESULTED IN YOUR REVISED BID OF $29.356 PER 100 UNITS FOR THE ADAPTERS WHICH REFLECTED A TOTAL CONTRACT PRICE OF $147,367.12. SEVERAL DAYS LATER YOU FORWARDED, UPON REQUEST, ANOTHER WD FORM 105A IN CONNECTION WITH YOUR REVISED BID. ON SEPTEMBER 12, 1951, YOUR BID WAS ACCEPTED, WHICH RESULTED IN THE CONSUMMATION OF CONTRACT NO. DA-36-034-ORD-489M. BY LETTER DATED OCTOBER 19, 1951, YOU ADVISED THE GOVERNMENT CONTRACTING OFFICER THAN AN ERROR HAD BEEN MADE IN YOUR BID IN THAT A MISPLACED DECIMAL POINT IN THE DIRECT LABOR COST -- REFLECTED IN THE COST ANALYSIS BREAKDOWN--- RESULTED IN $0.00363 PER UNIT FOR THIS COMPONENT INSTEAD OF THE INTENDED AMOUNT OF $0.036. AS A RESULT, YOU NOW CLAIM ADDITIONAL COMPENSATION IN THE TOTAL AMOUNT OF $51,957.

WHILE MR. BOLZ'S LETTER OF AUGUST 6, 1956, GOES INTO CONSIDERABLE DETAIL, IT APPEARS NECESSARY TO EXAMINE PARTICULARLY THOSE CONTENTIONS ADVANCED BY HIM WITH RESPECT TO WHETHER THE CONTRACTING OFFICER WAS, OR SHOULD HAVE BEEN, ON NOTICE OF THE PROBABILITY OF AN ERROR IN YOUR BID AT THE TIME OF ITS ACCEPTANCE SINCE WE BELIEVE THIS QUESTION REPRESENTS THE SOLE ISSUE IN THE CASE. MR. BOLZ TAKES THE POSITION PRIMARILY IN THIS REGARD THAT THE CONTRACTING OFFICER SHOULD HAVE NOTED THE ERROR BY ANALYZING THE DIRECT LABOR COSTS AS SHOWN ON WD FORM 105A, EITHER AS THEY STOOD ALONE, OR ON A PRICE COMPARISON BASIS WITH THE COST OF THE OTHER BIDS RECEIVED FOR THIS COMPONENT.

IN THIS CONNECTION, IT APPEARS THAT WITHOUT CONSIDERING MORE THAN A PRICE COMPARISON BETWEEN YOUR DIRECT LABOR COSTS OF $0.00363, AS REFLECTED ON WD FORM 105A ACCOMPANYING YOUR ORIGINAL BID--- $0.363 PER 100 UNITS--- AND THE THREE OTHER LOWEST BIDS RECEIVED OF $4.61, $5.16 AND $5.54, YOUR DIRECT LABOR COSTS DO REFLECT A LOW COST FIGURE. HOWEVER, EVEN ASSUMING, FOR THE SOLE PURPOSE OF A FURTHER DISCUSSION OF THIS ISSUE, THAT A GOVERNMENT CONTRACTING OFFICER DOES OWE THE RESPONSIBILITY OF MAKING A COMPLETE STUDY OF ALL COMPONENT PARTS OF A COST ANALYSIS BREAKDOWN WITH A VIEW TOWARD PROBABLE ERROR DETECTION, THERE MUST ALSO BE FULLY CONSIDERED IN THIS PARTICULAR CASE THE APPARENT FACT THAT WHEN THE BIDS AND COMPONENT PARTS THEREOF WERE EXAMINED BY THE CONTRACTING OFFICER HE WAS AWARE THAT YOU CONTEMPLATED SUBCONTRACTING 80 TO 90 PERCENT OF THE WORK COVERED BY THE CONTRACT, WHEREAS OTHER BIDDERS DID NOT PLAN TO SUBCONTRACT NEARLY TO THAT EXTENT. SINCE IT IS REPORTED THAT THE CONTRACTING OFFICER CONSIDERED THIS PARTICULAR FEATURE OF YOUR BID AND SINCE THE DIRECT LABOR COSTS WOULD, OF NECESSITY, BE DRASTICALLY AFFECTED BY SUCH A HIGH PERCENTAGE OF SUBCONTRACT WORK; ALSO, CONSIDERING THAT THE VERY NATURE OF THE WORK--- EXPERIMENTAL--- WOULD APPEAR TO LEND ITSELF MORE TO GREATER DIFFERENTIALS IN THE AMOUNT OF BIDS AND THE COMPONENT PARTS THEREOF, IT IS NOT BELIEVED THAT IT REASONABLY CAN BE CONCLUDED THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF AN ERROR IN THE DIRECT LABOR COSTS OF YOUR BID.

ALSO, IT MIGHT BE ADDED THAT THE CONTRACTING OFFICER IN HIS FIFTH INDORSEMENT OF SEPTEMBER 8, 1954, TO THE CHIEF OF ORDNANCE, SET OUT, FOR COMPARATIVE PURPOSES, THE FIGURES SUBMITTED BY THE FOUR LOWEST BIDDERS, SHOWING IN EACH CASE THE ESTIMATED COSTS OF MATERIAL, SUBCONTRACTING AND DIRECT LABOR. THESE FIGURES VARY CONSIDERABLY AND INSOFAR AS ESTIMATED MATERIAL COSTS PER 100 UNITS ARE CONCERNED, ARE AS FOLLOWS (BEGINNING WITH YOUR BID AS THE LOWEST BID): (1) $3.186; (2) $9.39: (3) $7.61; AND (4) $8.02. THE ESTIMATED COSTS FOR SUBCONTRACTING, SUBMITTED BY THESE BIDDERS, WERE RESPECTIVELY AS FOLLOWS: $22.843, $11.12, $11,76 AND $12.04. THE ESTIMATED COSTS FOR DIRECT LABOR WERE $0.36, $4.61, $5.54 AND $5.16, RESPECTIVELY. THE CONTRACTING OFFICER STATED THAT IN COMPARING THE COMBINED COSTS FOR MATERIAL, SUBCONTRACTING WORK AND DIRECT LABOR THE RESULTS SHOWED THAT YOUR ESTIMATED COSTS PER 100 UNITS WERE $26.389; THE SECOND LOWEST BIDDER'S ESTIMATED COSTS WERE $25.12; THE THIRD LOWEST BIDDER'S ESTIMATED COSTS WERE $24.91; AND THE FOURTH LOWEST BIDDER'S ESTIMATED COSTS WERE $25.22. THUS HE STATED THAT NEITHER AN INDIVIDUAL NOR AN OVERALL COMPARISON OF THE THREE ELEMENTS PERMITTED THE CONCLUSION "THAT THERE WAS AN ERROR THEREIN.'

ACCORDINGLY, UNDER THE FACTS AND EVIDENCE OF RECORD IN THIS CASE, IT MUST BE CONCLUDED THAT THE BID WAS ACCEPTED IN GOOD FAITH AND THAT SUCH ACCEPTANCE CONSUMMATED A VALID CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES. NEITHER OUR OFFICE NOR ANY OFFICER OF THE GOVERNMENT IS AUTHORIZED TO WAIVE OR RELINQUISH THE RIGHTS WHICH VEST IN THE GOVERNMENT UNDER SUCH A CONTRACT.

ON THE PRESENT RECORD THE SETTLEMENT OF NOVEMBER 3, 1954, MUST BE SUSTAINED.