B-147090, DEC. 21, 1961

B-147090, DEC. 21, 1961

TO THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 8, 1961, FROM THE AIR FORCE ACCOUNTING AND FINANCE CENTER, DENVER, COLORADO, FILE AJF, AND ITS ENCLOSURES, IN RESPONSE TO OUR REQUEST FOR A REPORT RELATIVE TO THE CLAIM OF ASTRON CORPORATION, 255 GRANT AVENUE, EAST NEWARK, NEW JERSEY, FOR AN ADDITIONAL PAYMENT IN THE AMOUNT OF $11,041.65 UNDER PURCHASE ORDER NO. (33-604) 61-4090 ISSUED BY DAYTON AIR FORCE DEPOT.

THE DAYTON AIR FORCE DEPOT ISSUED REQUESTS FOR PROPOSALS FOR FURNISHING VARIOUS ITEMS OF CAPACITORS, INCLUDING THOSE DESCRIBED IN ITEM NO. 5 OF PR NO. MD-1-5910-32642 AND ITEMS NOS. 14 AND 15 OF PR NO. MD-1-5910-32635. IT IS REPORTED THAT ASTRON CORPORATION WAS NOT FURNISHED A FORMAL INVITATION FOR BIDS BUT THAT ITS REPRESENTATIVE WAS GIVEN A VERBAL DESCRIPTION OF THE REQUIREMENTS BASED ON CERTAIN HUGHES AIRCRAFT DRAWINGS, COPIES OF WHICH WERE IN THE POSSESSION OF ASTRON CORPORATION. ON OCTOBER 20, 1960, ASTRON CORPORATION SUBMITTED A VERBAL QUOTATION ON ITEMS NOS. 14 AND 15 AT UNIT PRICES OF $10.15 (TOTAL PRICE $1,116.50) ON ITEM NO. 14 AND $6.90 (TOTAL PRICE $759) ON ITEM NO. 15. THE ONLY OTHER BID RECEIVED ON THESE ITEMS WAS AT UNIT PRICES OF $127.50 (TOTAL PRICE $14,025) AND $74.39 (TOTAL PRICE $8,182.90) ON ITEMS NOS. 14 AND 15, RESPECTIVELY.

THE CONTRACTING OFFICER INFORMED THE REPRESENTATIVE OF ASTRON CORPORATION THAT ITS BID WAS EXTREMELY LOW AND THAT HE SHOULD CHECK CAREFULLY BEFORE SUBMITTING A FORMAL BID. ON OCTOBER 25, 1960, THE REPRESENTATIVE DELIVERED A WRITTEN BID QUOTING THE SAME PRICES AS THOSE STATED ORALLY. WHEN THE CONTRACTING OFFICER INQUIRED AS TO WHETHER THE PRICE HAD BEEN VERIFIED, THE REPRESENTATIVE WROTE TO EACH ITEM OF THE QUOTATION "CONFIRMED, 25 OCTOBER 1960.'

PURCHASE ORDER NO. (33-604) 61-4090 WAS ISSUED NOVEMBER 17, 1960, COVERING ITEMS NOS. 5, 14 AND 15, DELIVERY TO BE COMPLETED ON OR BEFORE MARCH 18, 1961. IT APPEARS THAT ITEM NO. 5 WAS COMPLETED JANUARY 30, 1961, AND NO CLAIM IS MADE UNDER THAT ITEM. HOWEVER, IN 3D INDORSEMENT DATED NOVEMBER 2, 1961, FROM WRIGHT-PATTERSON AIR FORCE BASE, IT IS STATED THAT THE PURCHASE ORDER WAS NOT THEN COMPLETED AS TO ITEMS NOS. 14 AND 15. ON JUNE 15, 1961, SUPPLEMENTAL AGREEMENT NO. 1 WAS SIGNED, EXTENDING THE DELIVERY COMPLETION DATE TO SEPTEMBER 15, 1961, AND AMENDING THE SHIPPING INSTRUCTIONS.

IN A LETTER DATED FEBRUARY 15, 1961, TO NEWARK AIR PROCUREMENT OFFICE, NEWARK, NEW JERSEY, ASTRON CORPORATION REQUESTED RELIEF UNDER PUBLIC LAW 85-804, ALLEGING ERROR IN ITS BID ON ITEMS NOS. 14 AND 15 AND STATING THAT ITS BID WAS BASED ON THE USE OF POLYSTYRENE MATERIAL BUT THAT AFTER RECEIVING THE CONTRACT AND REVIEWING THE HUGHES AIRCRAFT DRAWINGS IT WAS NOTED THAT THE DRAWINGS FIXED THE TEMPERATURE REQUIREMENT AT 125 DEGREES C., WHEREAS POLYSTYRENE MATERIAL WOULD STAND A TEMPERATURE OF ONLY 75 DEGREES C. THEREFORE, IT BECAME NECESSARY TO USE TEFLON INSTEAD OF POLYSTYRENE, RESULTING IN A GREAT INCREASE IN THE COST OF MATERIAL. THEREFORE, ASTRON CORPORATION REQUESTED AN INCREASE OF $10,609.50 (AS SUBSEQUENTLY CORRECTED) IN THE CONTRACT PRICE.

ON MARCH 21, 1961, HEADQUARTERS, AIR MATERIEL COMMAND, DENIED ASTRON CORPORATIONS'S APPLICATION FOR RELIEF UNDER PUBLIC LAW 85-804, FOR THE STATED REASON THAT THERE WAS NO MUTUAL MISTAKE WITHIN THE PURVIEW OF THE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION.

GENERALLY, AWARD OF A CONTRACT FOLLOWING VERIFICATION OF THE BID UPON REQUEST OF THE CONTRACTING OFFICER RESULTS IN A BINDING CONTRACT. COMP. GEN. 942, 947; 27 ID. 17. HOWEVER, IN 35 COMP. GEN. 136 IT WAS HELD (QUOTING SYLLABUS):

"A CONTRACTOR IS NOT BOUND, EVEN AFTER AWARD, BY HIS VERIFICATION OF AN ERRONEOUS BID WHERE THE CONTRACTING OFFICER'S REQUEST FOR A GENERAL VERIFICATION FAILED TO PUT HIM ON NOTICE OF THE SPECIFIC MISTAKE SURMISED, AND, THEREFORE, THE CONTRACTOR IS NOT LIABLE FOR EXCESS COSTS INCIDENT TO REPLACEMENT CONTRACTS.'

IN THAT DECISION THERE WAS QUOTED A PORTION OF THE COURT'S DECISION IN UNITED STATES V. METRO NOVELTY MANUFACTURING CO., INC., AS FOLLOWS:

"CROSS MOTIONS ARE PRESENTED FOR SUMMARY JUDGMENT. PLAINTIFF SEEKS TO RECOVER $12,000 DAMAGES FROM DEFENDANT FOR ITS FAILURE TO CARRY OUT A $6,000 BID FOR UNIFORM ORNAMENTS. DEFENDANT CLAIMS MISTAKE IN THE COMPUTATION OF THE BID. PLAINTIFF ADMITS THAT THE ERROR WAS SO GROSS THAT IT WAS PLACED ON NOTICE. IT FURTHER ADMITS THAT THE ONLY CONSEQUENCE OF DEFENDANT'S FAILURE TO PERFORM WAS THE ACCEPTANCE OF THE SECOND LOWEST BID AND THAT THERE WAS NO DAMAGE TO THE GOVERNMENT FROM THE DELAY IN EXECUTION WHICH RESULTED FROM DEFENDANT'S PARTICIPATION IN THE BIDDING.

"PLAINTIFF'S PURCHASING AGENT SOUGHT TO AVOID THE FORCE OF KEMP V. UNITED STATES, D.C. MD. 1941, 38 F.SUPP. 568, BY TELEPHONING THE DEFENDANT AND ASKING FOR A "VERIFICATION" OF THE BID AND BY HAVING IT "CONFIRMED" BY TELEPHONE AND LETTER FROM DEFENDANT'S PRESIDENT. PLAINTIFF, HOWEVER, DID NOT PUT DEFENDANT ON NOTICE OF THE MISTAKE WHICH IT SURMISED. REAFFIRMATION OF THE BID UNDER THESE CIRCUMSTANCES DOES NOT BAR THE DEFENSE OF RESCISSION.

"DEFENDANT'S MOTION FOR SUMMARY JUDGMENT IS GRANTED.' SEE, ALSO KEMP V. UNITED STATES, 38 F.SUPP. 568, 572.

IN THE INSTANT MATTER, THE PRICES QUOTED BY ASTRON CORPORATION ON ITEMS NOS. 14 AND 15 WERE ONLY 7.96 PERCENT AND 9.27 PERCENT, RESPECTIVELY, OF THE PRICES QUOTED IN THE OTHER BID RECEIVED. ALTHOUGH THE FILE SHOWS THAT THE CONTRACTING OFFICER INFORMED THE BIDDER THAT ITS BID WAS EXTREMELY LOW, IT DOES NOT APPEAR THAT THE BIDDER WAS APPRISED OF THE FACT THAT THE DISPARITY WAS SO TREMENDOUS AS TO INDICATE A CERTAINTY THAT A GROSS ERROR HAD BEEN MADE IN SUBMITTING THE BID SO THAT IT WOULD FEEL IMPELLED TO RECOMPUTE ITS BID COMPLETELY.

WITH RESPECT TO THE SIGNING OF SUPPLEMENTAL AGREEMENT NO. 1--- STATED BY THE CONTRACTING OFFICER TO BE THE BASIS OF HIS RECOMMENDATION AGAINST RELIEF OF ASTRON CORPORATION--- IT IS TO BE OBSERVED THAT THE SOLE PURPOSE OF THE SUPPLEMENTAL AGREEMENT APPEARS TO HAVE BEEN TO EXTEND THE TIME FOR COMPLETION OF THE CONTRACT AND TO AMEND THE SHIPPING INSTRUCTIONS AND THAT THERE WAS NO CONTEMPLATION BY THE PARTIES THAT THE CONTRACT PRICE WAS THEREBY REAFFIRMED OR THAT ASTRON CORPORATION WAS ABANDONING ITS CLAIM FOR ADDITIONAL PAYMENT. THEREFORE, THE MAKING OF THE SUPPLEMENTAL AGREEMENT DOES NOT FORECLOSE ASTRON CORPORATION FROM ASSERTING ITS CLAIM.

IN VIEW OF THE FACTS AND REASONS ABOVE SET FORTH, IT IS CONCLUDED THAT ACCEPTANCE OF THE BID DID NOT RESULT IN A VALID CONTRACT AND THAT IT WOULD BE GROSSLY INEQUITABLE TO REQUIRE ASTRON CORPORATION TO FURNISH THE EQUIPMENT COVERED BY ITEMS NOS. 14 AND 15 AT THE PRICES QUOTED IN ITS BID. THEREFORE, PAYMENT SHOULD BE MADE ON A QUANTUM VALEBAT BASIS IN AN AMOUNT NOT EXCEEDING THAT CLAIMED, WHICH IS STATED BY ASTRON CORPORATION IN ITS LETTER OF AUGUST 29, 1961, TO BE ONLY THE DIFFERENCE BETWEEN THE COST OF THE MATERIAL ON WHICH THE BID WAS ERRONEOUSLY BASED AND THE COST OF THE MATERIAL REQUIRED BY THE PURCHASE ORDER AND DRAWINGS. AS TO THE REASONABLE VALUE OF THE EQUIPMENT INVOLVED, THERE IS NOTED IN THE FILE A LETTER DATED MAY 29, 1961, FROM SPRAGUE ELECTRIC COMPANY TO DAYTON AIR FORCE DEPOT, QUOTING UNIT PRICES OF $114.75 AND $66.95 FOR 110 EACH OF CAPACITORS IDENTICAL WITH THOSE COVERED BY ITEMS NOS 14 AND 15. THEREFORE, UPON COMPLETION OF DELIVERIES CONTEMPLATED UNDER ITEMS NOS 14 AND 15, PAYMENT SHOULD BE MADE TO ASTRON CORPORATION IN AN AMOUNT WHICH WILL RESULT IN AN AGGREGATE PAYMENT OF $12,485 UNDER THESE ITEMS. THIS AMOUNT INCLUDES THE AMOUNT OF THE BID ($1,875.50) AND AN ADDITIONAL PAYMENT OF $10,609.50 (THE AMOUNT OF THE ORIGINAL CLAIM) AND WILL STILL BE FAR BELOW THE AMOUNT OF THE OTHER BID RECEIVED ($22,207.90).

REFERENCE TO THIS DECISION SHOULD ACCOMPANY THE PURCHASE ORDER.

THE PAPERS TRANSMITTED WITH THE LETTER OF NOVEMBER 8, 1961, ARE RETURNED HEREWITH.