B-130209, JAN. 15, 1957

B-130209, JAN. 15, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED DECEMBER 27, 1956, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS), REQUESTING A DECISION AS TO WHETHER AN INFORMAL CONTRACT, AS EVIDENCED BY PURCHASE ORDER NO. 4460-56,ISSUED APRIL 9, 1956, BY THE UTAH GENERAL DEPOT, U.S. ARMY, MAY BE MODIFIED SO AS TO CORRECT AN ERROR ALLEGED TO HAVE BEEN MADE THEREIN.

IT APPEARS THAT ON APRIL 6, 1956, THE CONTRACTING OFFICER FOR THE UTAH GENERAL DEPOT SOLICITED TELEPHONE QUOTATIONS ON SEVERAL ITEMS OF PLUMBING SUPPLIES, INCLUDING ITEMS NOS. 1 AND 2, DESCRIBED AS FOLLOWS:

"PIPE, IRON WROUGHT, FS WW-P-441, BLACK, STANDARD, CLASS A, THREADED, WITH COUPLINGS, IN THE FOLLOWING SIZES AND QUANTITIES: ITEM 1, 1 1/4 IN., 987 FT; ITEM 2, 1 1/2 IN., 210 FT, FOR DELIVERY F.O.B. UTAH GENERAL DEPOT.'

QUOTATIONS WERE RECEIVED FROM TWO BIDDERS, AS FOLLOWS:

TABLE

QUOTATIONS PER FOOT

VENDOR ITEM 1 ITEM 2

PEERLESS-UTAH COMPANY .2579 .3068

CRANE COMPANY .2579 .3069

ON THE SAME DATE, APRIL 6, 1956, THE PEERLESS-UTAH COMPANY WAS NOTIFIED BY TELEPHONE THAT IT WOULD RECEIVE THE ORDER, AND PURCHASE ORDER NO. 4460- 56 WAS ISSUED ON APRIL 9, 1956, CALLING FOR THE DELIVERY OF THE ITEMS BY APRIL 12, 1956, AT THE PRICES QUOTED. DELIVERIES UNDER THE CONTRACTS WERE EFFECTED AT THE UTAH GENERAL DEPOT ON APRIL 17, 1956. HOWEVER, UPON INSPECTION OF THE ITEMS IT WAS NOTED THAT STANDARD BLACK "STEEL" PIPE HAD BEEN FURNISHED UNDER ITEMS NOS. 1 AND 2, INSTEAD OF "WROUGHT IRON" PIPE, AS SPECIFIED. THE CONTRACTOR WAS SO NOTIFIED AND THE MATERIAL WAS RETURNED TO IT IN DUE COURSE.

WHEN ADVISED OF THE REJECTION OF THE STEEL PIPE AND THE REASON THEREFOR, THE CONTRACTOR INFORMALLY ADVISED THE CONTRACTING OFFICER THAT IT HAD MADE A MISTAKE IN QUOTING ON ITEMS NOS. 1 AND 2, EXPLAINING IT HAD UNDERSTOOD THAT THE GOVERNMENT'S SOLICITATION WAS FOR BLACK STANDARD STEEL PIPE--- NOT WROUGHT IRON. IT WAS ADVISED THAT IT SHOULD DELIVER THE WROUGHT IRON PIPE AND THAT ITS CLAIM FOR AN INCREASE IN PRICE WOULD BE SUBMITTED TO HIGHER AUTHORITY. BY LETTER DATED MAY 7, 1956, THE CONTRACTOR'S MISUNDERSTANDING WAS REAFFIRMED AND THE CONTRACTING OFFICER ADVISED THAT STANDARD BLACK STEEL PIPE WAS A STOCK ITEM ON WHICH IMMEDIATE DELIVERY COULD BE MADE, WHEREAS WROUGHT IRON PIPE WOULD REQUIRE 30 DAYS IN WHICH TO EFFECT DELIVERY, AND THE PRICE OF WROUGHT IRON PIPE PER FOOT WOULD BE $0.5161 ON ITEM NO. 1 AND $0.6749 ON ITEM NO. 2,COVERING THE ONE AND ONE- FOURTH AND ONE AND ONE-HALF INCH PIPE, RESPECTIVELY. ACCOMPANYING THE CONTRACTOR'S LETTER WAS ITS ORIGINAL PRICE LIST PURPORTING TO CONFIRM ITS ALLEGATION THAT ITS ORIGINAL QUOTATION WAS MADE ON STANDARD BLACK STEEL PIPE, INSTEAD OF WROUGHT IRON PIPE. THE CONTRACTOR ALSO ALLEGED THAT THE OTHER BIDDER UNDER THIS ORAL SOLICITATION HAD MADE THE SAME ERROR, HAVING QUOTED ON STEEL RATHER THAN WROUGHT IRON PIPE. AFTER RECEIPT OF THE CONTRACTOR'S LETTER, THE CONTRACTING OFFICER CONTACTED A REPRESENTATIVE OF THE CRANE COMPANY AND WAS INFORMED THAT ITS ORIGINAL QUOTATION ALSO WAS BASED UPON FURNISHING STANDARD BLACK STEEL PIPE, AND ITS PRICES ON BLACK WROUGHT IRON PIPE OF THE SPECIFIED DIMENSIONS WOULD BE SUBSTANTIALLY THE SAME AS THOSE CLAIMED BY THE CONTRACTOR.

DELIVERY OF THE SPECIFIED QUANTITIES AND DIMENSIONS OF WROUGHT IRON PIPE WAS MADE ON JULY 16, 1956.

IT THUS APPEARS THAT ALMOST IDENTICAL BIDS WERE RECEIVED BY THE CONTRACTING OFFICER FROM THE TWO BIDDERS UNDER THE ORIGINAL SOLICITATION, AND SINCE THE CONTRACTING OFFICER DID NOT HAVE AVAILABLE AT THE TIME ANY ESTIMATE OF THE COST OF THE REQUIRED PIPE, THERE CAN BE NO SERIOUS QUESTION BUT THAT THE INSTANT BID OF THE PEERLESS-UTAH COMPANY WAS ACCEPTED BY HIM IN ENTIRE GOOD FAITH. ON THE OTHER HAND, HOWEVER, THE RECORD INDICATES THAT BOTH STEEL PIPE AND WROUGHT IRON PIPE ARE STANDARD COMMERCIAL ITEMS FOR WHICH APPROXIMATE SELLING PRICES ARE READILY AVAILABLE FROM REGULAR COMMERCIAL SOURCES, AND THAT THE PRICE DIFFERENTIAL BETWEEN THEM IS SUFFICIENTLY LARGE THAT THERE SHOULD BE NO BASIS FOR MISUNDERSTANDING BY ANYONE WITH ANY FAMILIARITY WITH THEM. IN THE CIRCUMSTANCES, THERE IS SOME QUESTION AS TO WHETHER THE CONTRACTING OFFICER MIGHT REASONABLY BE CHARGED WITH CONSTRUCTIVE NOTICE OF ERROR IN THE CONTRACTOR'S QUOTATION AT THE TIME OF THE AWARD.

IRRESPECTIVE OF THE ABOVE, HOWEVER, IT IS PERTINENT TO NOTE THAT THE INSTANT CONTRACT RESULTED SOLELY FROM ORAL SOLICITATION AND QUOTATION, WHICH INEVITABLY WOULD ENHANCE THE POSSIBILITY OF MISUNDERSTANDING. THE CIRCUMSTANCE THAT BOTH OF THE BIDDERS UNDER THE GOVERNMENT'S ORIGINAL SOLICITATION MADE THE SAME MISTAKE IN HAVING QUOTED PRICES FOR STANDARD BLACK STEEL PIPE, INSTEAD OF WROUGHT IRON, TENDS TO INDICATE THAT THE GOVERNMENT'S REQUEST FOR THE LATTER QUALITY OF PIPE WAS NOT MADE SUFFICIENTLY CLEAR TO THE BIDDERS.

ACCORDINGLY, IT MUST BE CONCLUDED THAT THE ELEMENT OF MUTUALITY, REQUISITE TO THE FORMATION OF A VALID CONTRACT, WAS LACKING AS TO THE SAID ITEMS NOS. 1 AND 2, AND THAT THE ISSUANCE OF THE PURCHASE ORDER CANNOT BE REGARDED AS HAVING CONSUMMATED A BINDING CONTRACT, AND HENCE, WE WOULD NOT BE REQUIRED TO OBJECT TO PAYMENT TO THE CONTRACTOR FOR THESE ITEMS UPON THE BASIS OF THEIR FAIR AND REASONABLE COMMERCIAL VALUE. SEE CLARK V. UNITED STATES, 95 C.CLS. 539, 542, AND DECISION TO YOU OF AUGUST 6, 1956, B-128719. SINCE THE DELIVERY FIRST MADE BY THE CONTRACTOR WAS OF STEEL PIPE, IT WOULD APPEAR RATHER TO CONFIRM THE ERROR CLAIMED THAN TO EVIDENCE AN ACCEPTANCE OF THE TERMS OF THE PURCHASE ORDER.

THE PAPERS WHICH ACCOMPANIED YOUR COMMUNICATION OF DECEMBER 27, 1956, ARE RETURNED HEREWITH.