B-155794, JAN. 6, 1965, 44 COMP. GEN. 383

B-155794, JAN. 6, 1965, 44 COMP. GEN. 383

CONTRACTS - MISTAKES - PRICE ADJUSTMENT - CONTRACTING OFFICER'S ERROR DETECTION DUTY UNDER A MILITARY SPECIFICATION THAT DID NOT DESCRIBE THE PIECE OF RUBBER REQUIRED AS CONSISTING OF TWO PIECES, THE ACCEPTANCE BECAUSE OF THE URGENCY OF THE PROCUREMENT OF THE LOW BID BASED ON AN UNCONFIRMED TELEPHONIC SUPPLIER QUOTATION, IMMEDIATELY ALLEGED TO BE ERRONEOUS, THE SUPPLIER HAVING QUOTED ON A SINGLE PIECE OF RUBBER, ENTITLES THE BIDDER TO A PRICE INCREASE, THE CERTIFYING OFFICER HAVING FAILED TO OBTAIN CONFIRMATION OF THE LOW BID PRIOR TO AWARD EVEN THOUGH REALIZING THAT THE TWO OTHER PROPOSALS RECEIVED, ALTHOUGH PRICED IN LINE WITH THE LOW BID, OFFERED UNACCEPTABLE ALTERNATE MATERIALS, AND THAT THE CONTRACTOR HAD BEEN URGED TO SUBMIT A WRITTEN QUOTATION PRIOR TO FORMAL COMMITMENT BY ITS SUPPLIER; THEREFORE, THE CONTRACTOR NOT HAVING BEEN PLACED ON NOTICE OF THE NATURE AND EXTENT OF THE MISTAKE WHICH SHOULD HAVE BEEN SUSPECTED BY THE CONTRACTING OFFICER, A SUPPLEMENTAL AGREEMENT TO THE CONTRACT MAY BE EXECUTED TO PROVIDE A PRICE INCREASE.

TO THE ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, JANUARY 6, 1965:

REFERENCE IS MADE TO A LETTER DATED DECEMBER 15, 1964, KDG, FROM THE DIRECTOR OF PROCUREMENT, REQUESTING OUR CONSIDERATION OF A PROPOSED MODIFICATION OF A CONTRACT WITH THE SOUTHEASTERN PRODUCTS CORPORATION, BIRMINGHAM, ALABAMA, WHICH WOULD INCREASE THE CONTRACT PRICE FROM $5,488.56 TO $9,131.40 ON ACCOUNT OF A MISTAKE IN BID WHICH WAS ALLEGED SHORTLY AFTER THE COMPANY RECEIVED TELEGRAPHIC NOTICE OF THE CONTRACT AWARD.

THE CONTRACT WAS AWARDED PURSUANT TO REQUEST FOR PROPOSALS NO. 2-5 01- 01592-01, ISSUED ON AUGUST 6, 1964, BY THE MARSHALL SPACE FLIGHT CENTER, HUNTSVILLE, ALABAMA, COVERING A REQUIREMENT FOR 36 SQUARE FEET OF RUBBER, SMOOTH, BOTH SIDES FLUID RESISTANT PER MILITARY SPECIFICATION MIL-R- 25897C, ASG TYPE II, CLASS 1, 1 IN. THICK, 36 IN. BY 72 IN. (STOCK NO. 9320-BL00001). THE ITEM DESCRIPTION DID NOT, HOWEVER, STATE SPECIFICALLY THAT TWO PIECES OF RUBBER WITH DIMENSIONS OF 36 IN. BY 72 IN. WOULD BE REQUIRED.

THE CONTRACTOR WAS URGED TO SUBMIT A QUOTATION AFTER THE SCHEDULED TIME FOR SUBMISSION OF PROPOSALS HAD LAPSED. TWO OTHER LATE PROPOSALS WERE RECEIVED. THOSE PROPOSALS CONCERNED UNACCEPTABLE ALTERNATE MATERIALS OFFERED AT PRICES OF $160.40 AND $225 PER SQUARE FOOT. THE CONTRACTOR INFORMALLY QUOTED A TOTAL PRICE OF $5,488.56 BASED PRIMARILY UPON A TELEPHONIC QUOTATION WHICH HAD BEEN RECEIVED FROM A PROPOSED SUPPLIER, CHASE-WALTON ELASTOMERS, INCORPORATED, HUDSON, MASSACHUSETTS. THE CONTRACTOR WAS REQUESTED TO CONFIRM THE $5,488.56 QUOTATION IN WRITING. IT WAS RELUCTANT TO DO SO UNTIL IT HAD RECEIVED A FORMAL QUOTATION FROM THE PROPOSED SUPPLIER. HOWEVER, IN VIEW OF THE STATED URGENCY FOR MAKING A CONTRACT AWARD, THE CONTRACTOR SUBMITTED A WRITTEN QUOTATION DATED AUGUST 26, 1964, SHOWING A UNIT PRICE OF $152.46 AND A TOTAL PRICE OF $5,488.56 FOR 36 SQUARE FEET OF RUBBER. THAT OFFER WAS ACCEPTED BY TELEGRAPHIC NOTICE OF CONTRACT AWARD ON SEPTEMBER 2, 1964, AND ON THE FOLLOWING DAY THE CONTRACTOR ALLEGED THAT A MISTAKE HAD BEEN MADE IN THAT THE SUPPLIER'S TELEPHONIC QUOTATION OF $4,989.60 HAD BEEN MISUNDERSTOOD AS COVERING 36 SQUARE FEET OF RUBBER, WHEREAS SUCH PRICE WAS INTENDED AS A UNIT PRICE FOR A PIECE OF RUBBER 36 INCHES IN WIDTH AND 72 INCHES IN LENGTH. IN FURNISHING WRITTEN CONFIRMATION OF ITS TELEPHONIC QUOTATION, THE SUPPLIER HAD LISTED 2 PIECES OF RUBBER, 36 IN. BY 72 IN. AT A PRICE OF $4,989.60 EACH. HOWEVER, BY LETTER OF SEPTEMBER 14, 1964, THE SUPPLIER OFFERED TO REDUCE ITS UNIT PRICE TO $4,150.65 ON THE BASIS OF A REQUESTED REVIEW OF THE PREVIOUS FORMAL QUOTATION.

THE CONTRACTOR'S REQUEST THAT THE CONTRACT BE CANCELED WITHOUT LIABILITY WAS NOT GRANTED AND IT THEN REQUESTED THAT THE CONTRACT PRICE BE CHANGED TO $9,131.40, WHICH INCLUDES A MATERIAL COST OF $8,301.30 PLUS ABOUT 10 PERCENT FOR OVERHEAD AND PROFIT IN HANDLING THE TRANSACTION.

THE LETTER FROM THE DIRECTOR OF PROCUREMENT SUGGESTS THAT THE ITEM DESCRIPTION IN THE REQUEST FOR PROPOSALS SHOULD HAVE BEEN MORE SPECIFIC BY SHOWING THAT TWO PIECES OF RUBBER WOULD BE REQUIRED, AND THAT A LACK OF CLARITY IN THE ITEM DESCRIPTION MAY HAVE CONTRIBUTED TO SOME CONFUSION IN THE MATTER. THE LETTER ALSO SUGGESTS THAT THE SITUATION IS ONE THAT REQUIRES THE GOVERNMENT NOT TO TAKE ADVANTAGE OF A KNOWN MISTAKE AND THAT IT WOULD BE INEQUITABLE TO DENY RELIEF IN VIEW OF THE FACT THAT THE CONTRACTOR IS PERFORMING AND STANDS TO LOSE A SUBSTANTIAL SUM.

THE REQUISITION FOR THE MATERIAL INCLUDED A COST ESTIMATE OF $12,000.60, OR MORE THAN DOUBLE THE CONTRACTOR'S QUOTED PRICE OF $5,488.56. ALSO, INVESTIGATION OF THE ALLEGED PRICING ERROR DISCLOSED THAT A SALE OF THE EXACT QUANTITY AND QUALITY OF MATERIAL HAD RECENTLY BEEN MADE BY VALLEY PRODUCTS, INCORPORATED, DECATUR, ALABAMA, FOR A TOTAL PRICE OF APPROXIMATELY $9,756. THAT FIRM WAS NOT REQUESTED TO QUOTE ON THE REQUIREMENT HERE INVOLVED BECAUSE THE MARSHALL SPACE FLIGHT CENTER DID NOT KNOW, AS OF AUGUST 21, 1964, THE DATE ON WHICH THE SOUTHEASTERN PRODUCTS CORPORATION WAS URGED TO SUBMIT A PROPOSAL, THAT VALLEY PRODUCTS, INCORPORATED, WAS A SUPPLIER OF THE PARTICULAR ITEM.

THE CONTRACTING OFFICER STATES THAT, IN EVALUATING THE PROPOSALS SUBMITTED, THE PRICE QUOTED BY THE SOUTHEASTERN PRODUCTS CORPORATION WAS GENERALLY IN LINE WITH THE PRICES QUOTED IN THE TWO OTHER PROPOSALS RECEIVED. HOWEVER, HE RECOGNIZES THE FACT THAT THE TWO OTHER PROPOSALS WERE FOR ALTERNATE MATERIALS AND COULD NOT BE ACCEPTED; AND INDICATES THAT A THOROUGH PRICE ANALYSIS WAS NOT PERFORMED DUE TO THE URGENCY OF THE PROCUREMENT AND THE RELATIVELY SMALL AMOUNT OF THE PROPOSED CONTRACT. THE CONTRACTING OFFICER CONSIDERS THAT A BONA FIDE MISTAKE WAS MADE IN THE CONTRACTOR'S PROPOSAL AND RECOMMENDS THAT THE CONTRACT BE AMENDED TO PERMIT A PRICE INCREASE FROM $5,488.56 TO THE CLAIMED AMOUNT OF $9,131.40.

IT IS APPARENT THAT THE PRICES QUOTED BY THE TWO COMPANIES WHICH OFFERED SUBSTITUTE MATERIALS PROPERLY COULD NOT HAVE BEEN CONSIDERED COMPARABLE WITH THE PRICE QUOTED BY THE SOUTHEASTERN PRODUCTS CORPORATION ON MATERIAL FULLY MEETING THE GOVERNMENT'S REQUIREMENTS. HENCE, IT WOULD SEEM TO HAVE BEEN INCUMBENT UPON THE CONTRACTING OFFICER TO OBTAIN A REALISTIC CONFIRMATION OF THE QUOTED PRICE OF THE SOUTHEASTERN PRODUCTS CORPORATION BEFORE MAKING A CONTRACT AWARD, CONSIDERING THAT THE ESTIMATED COST OF THE MATERIAL WAS $12,000.60 AS COMPARED WITH THE QUOTED PRICE OF $5,488.56. HOWEVER, NO ACTION WAS TAKEN OTHER THAN TO REQUEST THAT THE COMPANY'S INFORMAL QUOTATION BE CONFIRMED IN WRITING, AS APPARENTLY REQUIRED FOR THE PURPOSES OF MAKING A CONTRACT AWARD. THE CONTRACTOR WAS NOT ADVISED OF ANY SUSPECTED MISTAKE IN THE INFORMAL QUOTATION AND IT WAS KNOWN THAT THE CONTRACTOR WAS SUBMITTING A WRITTEN QUOTATION BEFORE RECEIVING A FORMAL COMMITMENT FROM ITS SUPPLIER BECAUSE OF THE STATED URGENCY FOR THE MATERIAL. THIS SHOULD HAVE BEEN SUFFICIENT IN ITSELF TO HAVE SHOWN THAT THE CONTRACTOR DID NOT THEN POSSESS SUFFICIENT INFORMATION TO MAKE A COMPLETE ANALYSIS AND VERIFICATION OF ITS INFORMALLY QUOTED PRICE.

GENERALLY, AWARD OF A CONTRACT FOLLOWING VERIFICATION OF A BID UPON REQUEST OF THE CONTRACTING OFFICER RESULTS IN A BINDING CONTRACT. COMP. GEN. 942, 947; 27 ID. 17. HOWEVER, WHERE, AS HERE, THE BIDDER HAS NOT BEEN PLACED ON NOTICE OF THE NATURE AND EXTENT OF THE MISTAKE WHICH IS SUSPECTED, OUR OFFICE HAS RECOGNIZED AND FOLLOWED THE RULING IN UNITED STATES V. METRO NOVELTY MANUFACTURING CO., 125 F.SUPP. 713, THAT REAFFIRMATION OF A BID, WHERE THE PLAINTIFF WAS NOT PLACED ON NOTICE OF THE MISTAKE WHICH THE GOVERNMENT SURMISED, DID NOT BAR THE DEFENSE OF RESCISSION.

OTHERWISE, THE SITUATION IN THIS CASE IS CONSIDERED TO BE FOR DISPOSITION IN ACCORDANCE WITH THE WELL-ESTABLISHED RULE THAT, IF A MATERIAL MISTAKE IS MADE BY ONE PARTY TO A CONTRACT AND THE MISTAKE IS KNOWN BY THE OTHER PARTY, OR BECAUSE OF ACCOMPANYING CIRCUMSTANCES THE OTHER PARTY HAD REASON TO KNOW OF THE MISTAKE, THE PARTY MAKING THE MISTAKE HAS THE RIGHT TO RESCISSION AND RESTITUTION. SEE C. N. MONROE MANUFACTURING COMPANY V. UNITED STATES, 143 F.SUPP. 449, 451; AND UNION PAINTING COMPANY V. UNITED STATES, 198 F.SUPP. 282.

ACCORDINGLY, YOU ARE ADVISED THAT WE WOULD HAVE NO OBJECTION TO THE PROPOSED EXECUTION OF A SUPPLEMENTAL AGREEMENT UNDER WHICH THE CONTRACT PRICE FOR THE 36 SQUARE YARDS OF MATERIAL WOULD BE INCREASED FROM $5,488.56 TO $9,131.40.