B-158334, JAN. 21, 1966

B-158334, JAN. 21, 1966

TO VICE ADMIRAL JOSEPH M. LYLE, DIRECTOR, DEFENSE SUPPLY AGENCY:

WE REFER TO A LETTER DATED JANUARY 13, 1966, WITH ENCLOSURES (YOUR REFERENCE DSAH-G), FROM R.F.S. HOMANN, ASSISTANT COUNSEL, WHICH SUBMITTED FOR OUR CONSIDERATION A REQUEST BY MICHAEL SCHIAVONE AND SONS INCORPORATED, 135 FRONT STREET, NEW HAVEN, CONNECTICUT, TO RESCIND THE AWARD MADE TO THAT CONCERN OF ITEM 90 ON CONTRACT DSA 16-6022-052, DATED OCTOBER 19, 1965.

SALES INVITATION NO. 16-6022, ISSUED SEPTEMBER 23, 1965, BY THE DEFENSE SURPLUS SALES OFFICE, NEWPORT, RHODE ISLAND, DESCRIBED ITEM 90 THUSLY:

"ALUMINUM SOLIDS SCRAP - 75S, BAR CUTOFFS. OUTSIDE STORAGE.

5,000 LBS.'

AN ABSTRACT OF THE BIDS SHOWS THAT THE FIVE BIDS RECEIVED ON THE ITEM IN QUESTION RANGED FROM A LOW OF $ .08250 PER POUND TO A SECOND HIGH BID OF $ .15793 PER POUND, AND THE HIGH BID OF $ .25260 PER POUND SUBMITTED BY SCHIAVONE. THE MARKET APPRAISAL VALUE, KNOWN TO THE CONTRACTING OFFICER PRIOR TO BID OPENING, WAS $ .14 PER POUND.

PURSUANT TO TELEPHONIC AND WRITTEN CORRESPONDENCE BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR, THE CONTRACTOR SUBMITTED A NOTARIZED STATEMENT AND WORKSHEET WHICH DISCLOSED THAT AN ERROR IN SUBTRACTION HAD BEEN MADE WHEN COMPUTING THE BID, RESULTING IN THE FIGURE OF $ .2526 PER POUND INSTEAD OF THE CORRECT PRICE OF $ .1526 PER POUND.

THE BASIC QUESTION FOR CONSIDERATION IS NOT WHETHER THE CONTRACTOR MADE A MISTAKE IN ITS BID BUT WHETHER, IN THESE CIRCUMSTANCES, THE CONTRACTING OFFICER HAD, OR SHOULD HAVE HAD, NOTICE OF THE ERROR PRIOR TO AWARD. AFTER AN ERRONEOUS BID HAS BEEN ACCEPTED THE CONTRACTOR MUST BEAR THE CONSEQUENCES THEREOF UNLESS THE ERROR WAS SO APPARENT THAT IT MUST BE PRESUMED THAT THE CONTRACTING OFFICER HAD NOTICE OF THE ERROR. 23 COMP. GEN. 596.

ORDINARILY, A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT DEEMED TO BE CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH THE SURPLUS ITEMS MAY BE PUT. HOWEVER, THE DIFFERENCE BETWEEN THE LOWEST AND SECOND HIGHEST BID, IN THIS CASE, IS $ .07543, WHILE THE DIFFERENCE BETWEEN SECOND HIGHEST AND HIGHEST BID IS $ .09467. THE HIGH BID EXCEEDED THE CURRENT MARKET APPRAISAL BY OVER 80 PERCENT AND THE SECOND HIGH BID BY OVER 60 PERCENT, WHICH IS UNUSUAL IN BIDS FOR SCRAP. SEE OUR DECISION B- 149660, SEPTEMBER 21, 1962. THE CONTRACTING OFFICER ADMITS THAT BECAUSE OF THESE CIRCUMSTANCES SHE SHOULD HAVE OBTAINED VERIFICATION OF THE BID PRIOR TO MAKING THE AWARD.

FOR THESE REASONS, THE AWARD TO MICHAEL SCHIAVONE AND SONS, INCORPORATED, MAY BE RESCINDED ON THIS ITEM OF THE CONTRACT.