B-156930, JUL. 28, 1965

B-156930, JUL. 28, 1965

TO THE SECRETARY OF AGRICULTURE:

FURTHER REFERENCE IS MADE TO A LETTER DATED JUNE 1, 1965, WITH ENCLOSURE, FROM THE ASSISTANT SECRETARY, FORWARDING A FILE FROM THE CONTRACTING OFFICER, REGION SIX, FOREST SERVICE, PORTLAND, OREGON, CONCERNING THE ASSESSMENT OF EXCESS COSTS AND THE REMISSION OF LIQUIDATED DAMAGES AS WELL AS THE RETURN OF A $100,000 BID BOND TO THE KUCKENBERG CONSTRUCTION COMPANY, INC., UNDER CONTRACT AWARDED TO IT UNDER INVITATION NO. R6-65- 182.

THE INVITATION WAS DATED FEBRUARY 10, 1965, AND REQUESTED BIDS ON ALL WORK FOR RESTORATION OF APPROXIMATELY 11 MILES OF THE UPPER CLACKAMAS RIVER ROAD NO. S-46, AND 4.5 MILES OF THE COLLAWASH RIVER NO. S-63 AND BAGBY ROAD NO. S-70, MT. HOOD NATIONAL FOREST, CLACKAMAS COUNTY, OREGON. A PREBID MEETING WAS HELD ON FEBRUARY 12, 1965, WITH REPRESENTATIVES FROM EACH OF TWELVE INTERESTED FIRMS. THE INVITATION HAD BEEN ISSUED IN ORDER TO MEET CONDITIONS OF EXTREME URGENCY IN THE AFFECTED AREA, FLOOD CONDITIONS HAVING CAUSED EXTREMELY HEAVY DAMAGE TO NATIONAL FOREST LANDS IN OREGON IN DECEMBER, 1964. THE CLACKAMAS HIGHWAY AND ITS TRIBUTARY ROADS RECEIVED SEVERE DAMAGES IN THE FLOOD. THE TWO MAJOR TRIBUTARY ROADS --- THE UPPER CLACKAMAS AND THE COLLAWASH--- REPRESENTED THE KEY BLOCK AGAINST REMOVAL OF 223 MILLION BOARD FEET OF LUMBER INVOLVED IN 85 TIMBER SALES AS WELL AS SOME 100 MILLION BOARD FEET OF TIMBER PLANNED FOR SPRING TIMBER SALES. FAILURE TO PROVIDE ACCESS TO THE UPPER COLLAWASH AND THE CLACKAMAS WITHIN 90 DAYS WOULD SERIOUSLY AFFECT 14 SAWMILLS, 7 PLYWOOD MILLS AND NUMEROUS LOGGING FIRMS. MANY WOULD BE SHUT DOWN COMPLETELY. THIS WOULD PLACE OUT OF WORK ABOUT 1,170 SAWMILL WORKERS, 1,360 PLYWOOD MILL WORKERS AND 400 WOODS WORKERS AND THEIR EQUIPMENT. SPEEDY ACTION BY THE FOREST SERVICE WAS IMPERATIVE. TRANSPORTATION FOR THE TIMBER INDUSTRY FOR THE STATE OF OREGON WAS AT STAKE. DUE TO THE NEED FOR REESTABLISHMENT OF ROADS WASHED OUT BY THE EXTENSIVE FLOODS, THE URGENCY OF THE PROJECT WAS MADE THE SUBJECT OF SPECIAL ATTENTION. ALL BIDDERS WERE ADVISED REGARDING THE SHORT BID PERIOD WITH BIDS SCHEDULED TO BE OPENED ON FEBRUARY 16, 1965. NINE OFFERS WERE RECEIVED AT BID OPENING ON THAT DATE. THE KUCKENBERG CONSTRUCTION CO., INC., WAS THE APPARENT LOW BIDDER AT $504,085.28. GOODFELLOW BROS., INC., WAS SECOND LOWEST BIDDER AT $646,511.00. THE DEPARTMENTAL ENGINEER'S ESTIMATE WAS $652,306.00.

IT IS REPORTED THAT THE ADMINISTRATIVE OFFICE ON FEBRUARY 16, 1965, THE DAY BIDS WERE OPENED, PROCEEDED TO PREPARE THE FORMAL CONTRACT AND PERFORMANCE AND PAYMENT BONDS ALONG WITH A FORMAL AWARD LETTER TO KUCKENBERG CONSTRUCTION COMPANY, HAVING BEEN ADVISED AT POST BID OPENING DISCUSSION WITH REPRESENTATIVES OF THAT COMPANY THAT THEIR BID WAS SATISFACTORY. AT APPROXIMATELY 4:20 P.M. OF THAT DAY MR. LARRY KUCKENBERG WHO REPRESENTED HIS COMPANY IN THE BIDDING ARRIVED TO PICK UP THE FORMAL AWARD DOCUMENTS. WHILE DOING SO HE STATED THAT HE HAD DISCOVERED AN APPARENT ERROR IN THEIR BID CALCULATION. HE STATED THAT HE WOULD TRY TO REACH HIS BROTHER, MR. HENRY KUCKENBERG, PRESIDENT OF THE COMPANY, WHO HAD THE FINAL DECISION AS TO WHETHER AN ERROR WOULD BE CLAIMED. HE WAS ASKED WHETHER HE COULD MAKE A FINAL DECISION AT THIS TIME AND WHAT BID ITEMS WERE AFFECTED BY THE ERROR. MR. KUCKENBERG ADVISED THAT HE FELT THE FIRM COULD PROBABLY HANDLE THE ERROR AND THAT HE DID NOT WANT TO MAKE A FINAL DECISION AT THIS TIME. HE INDICATED THAT HIS FIRM FELT THE TIME ALLOWED FOR RECONSTRUCTION OF THE CLACKAMAS RIVER ROAD WAS VERY SHORT. HE STATED THAT THEIR OFFER CONTAINED NO RESERVE FOR PROBABLE LIQUIDATED DAMAGES AND THAT THEY HAD BID LOW BECAUSE OF THEIR FAITH IN THE FOREST SERVICE AND THE PROMISED PROMPT PAYMENT FOR WORK PERFORMED. HE INDICATED FURTHER THAT THEIR THOROUGH KNOWLEDGE OF THE JOB THROUGH DISCUSSIONS WITH FOREST SERVICE PERSONNEL AND ON-SITE INSPECTIONS HAD PROVIDED THEM WITH A VERY CLEAR PICTURE OF WHAT WAS NEEDED TO BE DONE. HE STATED THAT THE FIRM WANTED TO KEEP THE JOB BUT WOULD NEED SOME CONSIDERATION FROM THE FOREST SERVICE IN CONTRACT ADMINISTRATION IN ORDER TO COMPLETE THE JOB SATISFACTORILY FOR ALL PARTIES.

ON FEBRUARY 17, 1965, MR. LARRY KUCKENBERG CALLED THE CONTRACTING OFFICE TO ADVISE THAT HE HAD CONTACTED HIS BROTHER, HENRY, BY TELEPHONE AND THAT HE HAD GENERALLY APPROVED THE PLAN TO PROCEED BUT THAT HENRY WANTED TO DISCUSS THE PROBLEM WITH OTHER COMPANY REPRESENTATIVES. DURING THE EVENING MR. LARRY KUCKENBERG CALLED THE CONTRACTING OFFICER TO ADVISE THAT AFTER CONSULTING WITH HENRY, BOTH BROTHERS FELT THAT SOME CLAIM FOR AN ERROR WOULD BE IN ORDER. NO DOCUMENTATION OR CLEAR STATEMENT OF BID ITEMS ALLEGED TO BE IN ERROR HAD AS YET BEEN OFFERED OR STATED BY THE COMPANY'S REPRESENTATIVES.

ON FEBRUARY 18, 1965, COMPANY OFFICIALS AND FOREST SERVICE REPRESENTATIVES ASSEMBLED FOR DISCUSSION OF THE MATTER. COUNSEL FOR THE COMPANY AT THIS MEETING PRESENTED SPECIFIC CLAIMS OF ERROR, IN EFFECT, AS FOLLOWS:

1. THAT APPROXIMATELY $194,000 HAD BEEN OMITTED FROM THE BID SUBMITTED BY THE KUCKENBERG COMPANY. THESE GENERALLY WERE OVERHEAD ITEMS TO BE ALLOCATED TO VARIOUS BID ITEMS.

2. COUNSEL STATED THAT THE INSPECTION TRIP ON FRIDAY WITH BID OPENING ON TUESDAY MORNING WAS AN EXTREMELY SHORT ADVERTISING PERIOD WHICH WOULD TEND TO INVITE IMPROPER BIDDING FROM CONTRACTORS. THE "HURRY UP" CALCULATION OF BIDS PLACED THE CONTRACTOR IN A POSITION WHERE HE HAD PROVIDED FOR NO CONTINGENCIES, NO SUITABLE PROFIT, AND NO RESERVE FOR POSSIBLE LIQUIDATED DAMAGES.

3. THAT, SINCE THE KUCKENBERG OFFER WAS SOME $150,000 BELOW THE ENGINEER'S ESTIMATE, WHICH REPRESENTED A 20 TO 30 PERCENT LOWER-THAN ESTIMATE OFFER, THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE THAT AN OBVIOUS ERROR HAD BEEN MADE.

THE CONTRACTING OFFICER STATED IN REBUTTAL THAT IMMEDIATELY UPON BID OPENING, THE KUCKENBERG COMPANY OFFICIALS WERE REQUESTED TO REMAIN TO DISCUSS THEIR OFFER AND HE RECITED THE ENTHUSIASTIC RESPONSE RECEIVED FROM MR. LARRY KUCKENBERG, HIS SUPERINTENDENT AND HIS ENGINEER. IT WAS ALSO POINTED OUT THAT THE COMPANY HAD BEEN INVOLVED IN ON-SITE INSPECTIONS AND DISCUSSIONS WITH MT. HOOD ENGINEERS FOR SOME TWO OR THREE WEEKS WHEN COST- PLUS-FIXED-FEE CONTRACTING HAD BEEN CONSIDERED WITH THIS FIRM. THE FACT THAT THE KUCKENBERG COMPANY HAD CONFIRMED THEIR BID OFFER IMMEDIATELY FOLLOWING BID OPENING, HAD NOT MENTIONED THE POSSIBILITY OF AN ERROR UNTIL LATER THAT AFTERNOON, AND THEN HAD FAILED TO MAKE A FINAL DECISION AS TO WHETHER AN ERROR HAD BEEN MADE, IN THE OPINION OF THE CONTRACTING OFFICER, PLACED THE FOREST SERVICE IN THE POSITION WHERE AN AWARD HAD TO BE MADE. THE CONTRACTING OFFICER STATED FURTHER THAT UNDER THESE CIRCUMSTANCES HE FELT THAT WHILE HE HAD BEEN ON PATENT NOTICE OF A PROBABLE ERROR, EVERY REASONABLE ACTION HAD BEEN TAKEN TO DETERMINE WHETHER THE CONTRACTOR INTENDED TO CLAIM SUCH ERROR OR WHETHER THE BID PRICE WAS SATISFACTORY. HE ALSO POINTED OUT THAT IN EVERY DISCUSSION WITH LARRY KUCKENBERG THE BIDDER HAD INDICATED HIS COMPANY FELT IT WOULD STILL GO ALONG WITH THE JOB AND THAT NO EVIDENCE HAD BEEN OFFERED TO SUPPORT THE CLAIMED ERRORS. THE MEETING ON FEBRUARY 18, 1965, MR. MOORE, COUNSEL, STATED THAT THE CONTRACTOR AND BID BOND SURETY WOULD AGREE ON A SINGLE ACTION. IF THE CONTRACTOR REFUSED TO DO THE WORK, THE SURETY WOULD FOLLOW THE SAME PROCEDURE, AND WOULD EXPECT THE FOREST SERVICE TO APPROACH THE SECOND LOW BIDDER TO ACCOMPLISH THE WORK. COUNSEL THEN ASKED, IN EFFECT, THAT THE KUCKENBERG COMPANY BE RELEASED ON A CLAIMED MISTAKE IN BIDDING. HE WAS ADVISED THAT THE CONTRACTING OFFICER CONSIDERED THE ACCEPTANCE OF THE AWARD LETTER BY MR. LARRY KUCKENBERG AS CONSTITUTING ACCEPTANCE OF THE AWARD AND THAT UNDER THE CIRCUMSTANCES THE URGENCY OF THE SITUATION REQUIRED THAT THE MATTER BE CONSIDERED A CLAIMED MISTAKE IN BID AFTER AWARD OF CONTRACT.

FURTHER DISCUSSION FOLLOWED REGARDING THE CONTRACTOR'S RIGHT TO RESERVE AN APPEAL TO THE COMPTROLLER GENERAL AFTER WORK HAD STARTED ON THE JOB. HE WAS ASSURED OF SUCH RIGHT BUT THAT A CLAIM OF ERROR WOULD REQUIRE THE SUBMISSION OF ORIGINAL BID WORK SHEETS AND ALL SUPPORTING DOCUMENTS AS WELL AS A SAMPLE OF PREVIOUS BIDDING TECHNIQUES TO PROVIDE ADEQUATE INFORMATION FOR A DECISION FROM THIS OFFICE. THE COMPANY REPRESENTATIVE THEN RETIRED FOR CONSULTATION RETURNING TO ANNOUNCE THAT THEY WERE PREPARED TO PROCEED WITH THE WORK WITH THE UNDERSTANDING THAT THEY WERE NOT WAIVING THEIR RIGHT TO SUBMIT A CLAIM TO THE COMPTROLLER GENERAL COVERING THEIR ALLEGED MISTAKE IN BID. QUESTION WAS THEN RAISED FOR THE FIRST TIME BY MR. HENRY KUCKENBERG REGARDING PAYMENT FOR MATERIAL UNDER AN ITEM OF THE CONTRACT. UPON BEING ADVISED OF THE METHOD OF PAYMENT HE STATED THAT THE EARLIER AGREEMENT TO PROCEED WAS WITHDRAWN AND THAT THE COMPANY WOULD FURTHER CONSIDER THE MATTER.

ON FEBRUARY 19, 1965, THE COMPANY ADVISED THE CONTRACTING OFFICER THAT A CONCLUSION HAD BEEN REACHED THAT THE COMPANY WOULD RATHER HAZARD THE FORFEITURE OF ITS $100,000 BID BOND THAN RISK $150,000 OF EXCESS COSTS AND WOULD PRESS FOR RELEASE ON THE BASIS OF CLAIMED MISTAKE IN BID. DOCUMENTATION WAS YET FORTHCOMING SUBSTANTIATING THE ALLEGATION OF ERROR. THE KUCKENBERG DECISION TO REFUSE TO EXECUTE STANDARD FORM NO. 23 WITH BONDS AND TO ATTEMPT TO WITHDRAW THEIR BID WAS TELEPHONED TO THE CONTRACTING OFFICER ON FEBRUARY 19, 1965. THE ADMINISTRATIVE OFFICE THEN DETERMINED TO TERMINATE THE KUCKENBERG CONSTRUCTION COMPANY'S RIGHT TO PROCEED, TO MEET WITH THE GOODFELLOW COMPANY AS SECOND LOWEST BIDDER AND ARRANGE FOR AWARD TO THAT COMPANY WITHOUT READVERTISEMENT. THIS WAS DONE AND WORK IS STATED TO BE PROCEEDING ON SCHEDULE. IT IS UNDERSTOOD THAT THE KUCKENBERG CONSTRUCTION COMPANY OFFICIALS HAVE NEVER SIGNED THE CONTRACT OR PERFORMANCE AND PAYMENT BONDS. THE EVIDENCE OF ERROR RELIED UPON BY KUCKENBERG WAS MAILED TO THE CONTRACTING OFFICE ON MARCH 15, 1965. IT IS THE CONTRACTING OFFICER'S OPINION THAT THESE WORK SHEETS DO NOT CLEARLY AND UNMISTAKABLY DETAIL THE ERRORS AND OMISSIONS. THE WORK SHEETS AND PROPOSED CONSTRUCTION SCHEDULE CONTAIN DEFINITE REFERENCES TO DOUBLE SHIFTING AND PRODUCTION BASED ON DOUBLE SHIFT OPERATIONS. HOWEVER, THE SUMMARY STATEMENT INDICATES DOUBLE SHIFTING WAS COMPLETELY OMITTED. IT IS STATED THAT THE CONTRACTOR HAS NOT PRESENTED SUFFICIENT, CLEAR-CUT, DETAILED EVIDENCE TO ELIMINATE ANY DOUBT AS TO THE AUTHENTICITY OF ITS CLAIMED MISTAKE IN BID. ITS PRESENTATION FAILS, IN THE OPINION OF THE CONTRACTING OFFICE, TO REFLECT THE CAREFULLY PREPARED WORK SHEETS THAT COULD BE EXPECTED FROM A COMPANY OF THIS SIZE AND EXPERIENCE. THE OBVIOUS DIFFERENCES IN THE THINKING OF PRESIDENT HENRY KUCKENBERG AND HIS BROTHER, SECRETARY TREASURER LAWRENCE KUCKENBERG, RAISES SOME QUESTION, IT IS STATED, AS TO WHETHER THE DISCLOSURE OF SOME $142,000 DIFFERENCE BELOW THE NEXT BIDDER MIGHT HAVE INFLUENCED THE DECISION TO SUBMIT CLAIM FOR MISTAKE IN BID.

WHILE THE QUESTION IS SUBMITTED AS A CLAIM MADE "AFTER AWARD" AND AS THEREFORE, A MATTER FOR DETERMINATION BY THE COMPTROLLER GENERAL, THE RECORD ENCLOSED WITH THE SUBMISSION REVEALS KNOWLEDGE IN THE CONTRACTING OFFICER OF ERROR ALLEGED PRIOR TO PREPARATION OF ANY AWARD DOCUMENTS. IS REVEALED IN THE CONTRACTING OFFICER'S STATEMENT THAT "THE FIRST STATEMENT OF POSSIBLE ERROR CAME AFTER THE EXPOSURE OF ALL BID OFFERS.' AGAIN, IN THE CHRONOLOGICAL RECORD SUBMITTED BY THE CONTRACTING OFFICER IT IS STATED IN CONNECTION WITH THE DELIVERY OF THE FORMAL CONTRACT AND PERFORMANCE AND PAYMENT BONDS,"* * * WHILE PICKING UP THE DOCUMENTS, MR. KUCKENBERG STATED THAT HE HAD DISCOVERED AN APPARENT ERROR IN THEIR BID CALCULATION.' IT THUS APPEARS THAT CLAIM OF ERROR WAS MADE BY THE BIDDER PRIOR TO THE AWARD ON FEBRUARY 16 ALTHOUGH SUBSTANTIATING EVIDENCE OF ERROR WAS NOT OFFERED UNTIL FEBRUARY 18 WITH DOCUMENTATION THEREOF ON MARCH 15, 1965.

THE GENERAL RULE IS THAT THE ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT. SEE MASON COAL COMPANY V. UNITED STATES, 64 CT.CL. 526; RESTATEMENT OF THE LAW OF CONTRACTS, SECTION 503; AND WILLISTON ON CONTRACTS, SECTION 1578. ALSO, SEE MOFFETT, HODGKINS AND CLARKE COMPANY V. ROCHESTER, 178 U.S. 373; KENP V. UNITED STATES, 38 F.SUPP. 568; ALTA ELECTRIC AND MECHANICAL COMPANY, INC. V. UNITED STATES, 90 CT.CL. 466; AND 17 COMP. GEN. 575, 576. UNDERTAKING TO BIND A BIDDER BY ACCEPTANCE OF A BID AFTER NOTICE OF A CLAIM OF ERROR BY THE BIDDER, THE GOVERNMENT VIRTUALLY UNDERTAKES THE BURDEN OF PROVING EITHER THAT THERE WAS NO ERROR OR THAT THE BIDDER'S CLAIM WAS NOT MADE IN GOOD FAITH. THE DEGREE OF PROOF REQUIRED TO JUSTIFY WITHDRAWAL OF A BID BEFORE AWARD IS IN NO WAY COMPARABLE TO THAT NECESSARY TO ALLOW CORRECTION OF AN ERRONEOUS BID, 36 COMP. GEN. 441.

THE SUBMITTED RECORD DISCLOSES THAT THE AMOUNT OF THE KUCKENBERG BID OF $504,085.28, WAS $142,425.72 LOWER THAN THE NEXT LOWEST BID OF $646,511 SUBMITTED BY GOODFELLOW BROS., INC., AND $148,220.72 LOWER THAN THE GOVERNMENT'S ESTIMATE. OTHER BIDS RANGED FROM $727,198.80 TO $1,661,940.30. WHILE THE BIDDER'S WORKING PAPERS DO NOT REVEAL ANY DETAIL SUFFICIENT TO DETERMINE WHAT ITS ALLEGED BID PRICE MIGHT HAVE BEEN, THE SUBSTANTIAL DIFFERENCE BETWEEN THE COMPANY'S BID, THE GOVERNMENT'S ESTIMATE AND THE OTHER BIDS STRONGLY INDICATES SOME INADVERTENCE WAS INVOLVED IN THE BIDDER'S FAILING TO INCLUDE ITEMS FOR SECOND SHIFT OPERATIONS, ADDITION OF TOTAL HOURS FOR REPAIR AND SERVICING OF EQUIPMENT, ENGINEERING, CONTINGENCIES (LIQUIDATED DAMAGES FOR OVERRUN TIME), COST OF SURETY BONDS AND PROFIT, AS CLAIMED. THE NEED FOR HASTE IN THE PROCUREMENT IN THE FACE OF THE PUBLIC EXIGENCY FOR RESUMPTION OF TRANSPORTATION IN THE AFFECTED AREAS UNDERSTANDABLY COULD HAVE INFLUENCED BOTH THE CONTRACTING OFFICER'S DESIRE TO PROCEED IMMEDIATELY WITH THE AWARD IN THE CIRCUMSTANCES AND THE BIDDER'S RELUCTANCE TO INSIST ON WITHDRAWAL OF ITS BID OR ITS FAILURE TO TAKE A STRONGER POSITION REGARDING ITS CLAIMED MISTAKE PRIOR TO FEBRUARY 19TH WITH RESPECT TO ITS BID. PEERLESS CASUALTY CO. V. HOUSING AUTHORITY OF HAZELHURST, 228 F.2D 376; REFINING ASSOCIATES, INC. V. UNITED STATES, 109 F.SUPP. 259; UNITED STATES V. LIPMAN, 122 F.SUPP. 284; RUSHLIGHT AUTOMATIC SPRINKLER CO. V. CITY OF PORTLAND, 219 P.2D 732 AND PUGET SOUND PAINTERS V. STATE, 278 P.2D 302. SEE ALSO DONALDSON V. ABRAHAM, 122 P. 1003. THE CIRCUMSTANCES SURROUNDING THE AWARD WERE NOT CONDUCIVE TO THE MOST CONTEMPLATIVE JUDGMENT REGARDING THE POSITION TO BE TAKEN BY THE PARTIES. THE SAME EMERGENCY REASONABLY COULD HAVE RESULTED IN THE COMMISSION OF ERROR.

ACCORDINGLY, IT APPEARING THAT THERE HAS BEEN NO PERFORMANCE BY THE CONTRACTOR AND THAT THE BIDDER DID NOT SIGN THE CONTRACT OR PERFORMANCE BONDS, THE AWARD TO KUCKENBERG CONSTRUCTION COMPANY, INC., SHOULD BE CANCELED WITHOUT LIABILITY AND THE BID BOND RETURNED.