B-140488, SEP. 2, 1959

B-140488, SEP. 2, 1959

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER (R11.2 L8/L8/NT4-13), DATED AUGUST 13, 1959, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING THE MATTER OF A MISTAKE IN THEIR BID ON ITEM NO. 11, WHICH DIESEL EQUIPMENT CO., PORTLAND, OREGON, ALLEGED AFTER AWARD TO THEM OF SALES CONTRACT NO. N4075S-8248 BASED ON THE BID.

BY SALES INVITATION NO. B-47-59-407, ISSUED MAY 7, 1959, THE U.S. NAVAL SUPPLY DEPOT, MECHANICSBURG, PENNSYLVANIA, SOLICITED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF 94 ITEMS OF SURPLUS PROPERTY LISTED AND DESCRIBED THEREIN. ITEM NO. 11, CONSISTING OF 177 UNITS, WAS DESCRIBED IN THE INVITATION AS:

"PUMP ASSY.MFD. BY OR FOR HERCULES MOTOR CO. PART NO. 75175DS. APPLICATION: MODEL DOOD, 4 CYLINDER DIESEL ENGINE. TOTAL ACQ. COST: $17,523. CONDITION: UNUSED AND GOOD.'

BIDS WERE REQUIRED TO BE SUBMITTED ON A PER EACH BASIS, AND BIDDERS WERE AUTHORIZED TO SUBMIT BIDS FOR ANY OR ALL OF THE MATERIAL LISTED IN ITEM NO. 11.

THE ABSTRACT OF BIDS DISCLOSES THAT 29 UNIT PRICES WERE BID ON THE MATERIAL IN ITEM NO. 11, DIESEL EQUIPMENT CO. SUBMITTING A BID, AS FOLLOWS:

CHART

QUANTITY

(NO. OF UNIT OF PRICE BID

UNITS) MEASURE PER UNIT TOTAL PRICE BID

10 EA. $22.10 $221.00

20 EA. 18.10 362.00

60 EA. 11.80 708.00

77 EA. 7.90 608.30

OTHER BIDS RANGED FROM A LOW UNIT PRICE OF $0.10 FOR A QUANTITY OF TEN UNITS TO $9.412 EACH FOR TEN UNITS. TEN OF THE UNITS WERE SOLD TO ONE BIDDER AT ITS BID PRICE OF $9,412 EACH. THE BID OF DIESEL EQUIPMENT CO. WAS ACCEPTED ON MAY 28, 1959, AND THE REMAINING 167 UNITS WERE SOLD TO THEM, AT THEIR RESPECTIVE UNIT PRICES, ON CONTRACT NO. N4075S 8248 FOR A TOTAL AMOUNT OF $1,899.30. THE COMPANY'S BID DEPOSIT IN THE AMOUNT OF $400 WAS APPLIED AGAINST THE CONTRACT PRICE, LEAVING A BALANCE OF $1,499.30 DUE THE GOVERNMENT, WHICH APPARENTLY HAS NOT BEEN PAID BY THE PURCHASER.

AFTER AWARD, IN A LETTER DATED JUNE 10, 1959, CONFIRMING A TELEPHONE CONVERSATION OF A WEEK PREVIOUSLY, DIESEL EQUIPMENT CO. ADVISED THE CONTRACTING OFFICER THAT THEY HAD MADE A MISTAKE IN SUBMITTING THEIR BID ON ITEM NO. 11, EXPLAINING THAT THEY HAD MISTAKENLY CONCLUDED THAT THE MATERIAL IN ITEM NO. 11 WAS "FUEL PUMPS," NOT REALIZING THE POSSIBILITY OF IT BEING WATER PUMPS, AND HAD BID ACCORDINGLY. THE COMPANY ADMITTED FULL RESPONSIBILITY FOR THE ALLEGED ERROR, STATING THAT THEY HAD NO CRITICISM OF THE DESCRIPTION IN THE CATALOG OF THE MATERIAL IN ITEM NO. 11. THE COMPANY FURTHER STATED THAT HAD THEY BEEN MORE CAREFUL IN READING THE DESCRIPTION IN THE CATALOG AND CHECKED THE PART NUMBER MORE CLOSELY THEY WOULD HAVE FOUND OUT THAT THE MATERIAL WAS SOMETHING THEY DID NOT WANT. HOWEVER, THE BIDDER CONTENDED THAT THEIR TOP BID PRICE WAS OVER 20 PERCENT OF THE ACQUISITION PRICE, WHILE THE ONLY OTHER SUCCESSFUL BID WAS LESS THAN 10 PERCENT; ALSO, THAT THE PRICES BID BY THEM--- AT LEAST ON THE TOP SIDE--- WOULD HAVE BEEN VERY MUCH IN LINE WITH WHAT THE GOVERNMENT HAD BEEN RECEIVING FOR "4 CYLINDER PUMP ASSY," BUT IT WAS MUCH MORE THAN WHAT THE ,WATER PUMPS" HAD BEEN BRINGING.

WHILE DIESEL EQUIPMENT CO. MAY HAVE MADE AN ERROR IN THEIR BID, AS ALLEGED, THE BASIC QUESTION FOR CONSIDERATION HERE, HOWEVER, IS NOT WHETHER THE COMPANY MADE A MISTAKE IN THEIR BID BUT WHETHER THE ACCEPTANCE OF THE BID BY THE CONTRACTING OFFICER CONSUMMATED A VALID AND BINDING CONTRACT. THE ESTABLISHED RULE IS THAT ACCEPTANCE OF A BID, IN THE ABSENCE OF A MUTUAL MISTAKE OR OF THE CONTRACTING OFFICER ACCEPTING THE BID HAVING NOTICE--- ACTUAL OR CONSTRUCTIVE--- OF SUCH CIRCUMSTANCES AS WOULD MAKE HIS ACCEPTANCE AN ACT OF BAD FAITH, RESULTS IN A VALID AND BINDING CONTRACT.

THE PURCHASER HERE CONCEDES THAT SUCH ERROR AS MAY HAVE BEEN MADE WAS DUE SOLELY TO THEIR OWN NEGLIGENCE IN THE PREPARATION OF THEIR BID AND WAS IN NO WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. THE ERROR, AS ALLEGED, THEREFORE, WAS UNILATERAL AND NOT MUTUAL.

WHILE THE THREE TOP BID QUOTATIONS SUBMITTED BY DIESEL EQUIPMENT CO. WERE CONSIDERABLY HIGHER THAN THE OTHER BIDS RECEIVED ON ITEM NO. 11, IT CAN NOT BE SAID THAT THE DIFFERENCES WERE SO GREAT AS TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THE COMPANY'S BID. IT IS NOTED THAT THE UNIT ACQUISITION COST OF THE PUMPS, DESCRIBED AS "UNUSED AND GOOD," IS $99. A BID OF $0.10 OR EVEN $22.10 PER UNIT WOULD NOT SEEM UNREASONABLE TO ANYONE WITH AUTHORITY TO ACCEPT BIDS. FURTHERMORE, THIS WAS A SALE OF GOVERNMENT SURPLUS PROPERTY AND, IN VIEW OF THE WIDE RANGE OF PRICES ORDINARILY RECEIVED ON WASTE, SALVAGE, AND SURPLUS PROPERTY, A MERE DIFFERENCE IN THE PRICES BID WOULD NOT NECESSARILY PLACE A CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN A BID FOR THE PURCHASE OF SUCH PROPERTY, AS WOULD A LIKE DIFFERENCE IN THE PRICES QUOTED ON NEW EQUIPMENT OR SUPPLIES TO BE FURNISHED TO THE GOVERNMENT. PRICES OFFERED TO THE GOVERNMENT FOR ITS SURPLUS PROPERTY ARE BASED MORE OR LESS UPON THE USE TO WHICH THE PROPERTY IS TO BE PUT BY THE PARTICULAR BIDDER OR UPON THE RISK OF RESALE THE BIDDER MIGHT WISH TO TAKE. SEE 28 COMP. GEN. 550, 551.

THUS, SO FAR AS THE PRESENT RECORD SHOWS, THE ACCEPTANCE OF THE BID OF DIESEL EQUIPMENT CO., WITHOUT ACTUAL OR CONSTRUCTIVE NOTICE OF ANY ERROR THEREIN, WAS IN GOOD FAITH AND RESULTED IN A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES.

ACCORDINGLY, WE FIND NO LEGAL BASIS FOR AUTHORIZING REFUND TO DIESEL EQUIPMENT CO. OF THE FULL AMOUNT OF ITS BID DEPOSIT. HOWEVER, IN ACCORDANCE WITH THE TERMS OF PARAGRAPH 18 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE SALE, IN EXERCISING THE GOVERNMENT'S RIGHT TO RETAIN LIQUIDATED DAMAGES IN CASE THE PURCHASER DEFAULTS UNDER THE CONTRACT, 20 PERCENT OF THE PURCHASE PRICE SHOULD BE RETAINED FROM THE AMOUNT OF THE BID DEPOSIT AND THE BALANCE, IF ANY, REMITTED TO DIESEL EQUIPMENT CO.