B-160002, SEP. 14, 1966

B-160002, SEP. 14, 1966

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 1, 1966, WITH ENCLOSURES, FILE DSAH-G, FROM R. F. S. HOMANN, ASSISTANT COUNSEL, REQUESTING OUR DECISION AS TO WHETHER SALES CONTRACT NO. 41-7003-049 AWARDED ON JULY 14, 1966, TO THE OCEAN MACHINERY CORPORATION (OCEAN) BY THE DEFENSE SURPLUS SALES OFFICE, OGDEN, UTAH, MAY BE RESCINDED BECAUSE OF A MISTAKE IN BID ALLEGED AFTER AWARD.

ITEM 1 WAS DESCRIBED IN THE INVITATION FOR BIDS AS AN ELECTRIC PUMP IN FAIR CONDITION. THE BID OF OCEAN WAS HIGH AT $1,862 AND ITEM 1 WAS AWARDED TO THAT FIRM. FIFTEEN OTHER BIDS WERE SUBMITTED ON THAT ITEM RANGING IN PRICE FROM $609.89 TO $56.99. THE CURRENT MARKET APPRAISAL OF THE ITEM WAS $330.

ON JULY 19, 1966, THE CONTRACTOR'S TREASURER ORALLY ADVISED THE CONTRACTING OFFICER THAT SHE HAD MADE AN ERROR BY INDICATING ITEM 1 AS THE ITEM BID UPON RATHER THAN ITEM 107. BY LETTER OF JULY 19, 1966, THE CONTRACTOR CONFIRMED THE ALLEGED ERROR AND SUBMITTED WORKPAPERS WHICH CLEARLY SHOW AN INTENTION TO BID ON ITEM 107.

THE CONTRACTING OFFICER STATES THAT A REVIEW OF THE BID SHOWS THAT THE FIGURE 14 WAS ENTERED IN THE BID PORTION OF THE STANDARD FORM 114 A WHICH INDICATED THAT THE ITEM BID UPON WAS LISTED ON PAGE 14 OF THE INVITATION FOR BIDS; HOWEVER, ITEM 1 DOES NOT APPEAR ON PAGE 14 BUT ITEM 107 DOES. THE CONTRACTING OFFICER ALSO STATES THAT OCEAN'S BID WAS THREE TIMES GREATER THAN THE BID OF THE NEXT HIGH BIDDER AND WAS FIVE AND ONE-HALF TIMES HIGHER THAN THE CURRENT MARKET APPRAISAL OF THE ITEM. IN VIEW THEREOF, THE CONTRACTING OFFICER RECOMMENDS RESCISSION OF THE CONTRACT BECAUSE HE NOW BELIEVES THAT THE FACTS OF RECORD WERE SUCH AS TO HAVE PLACED HIM ON NOTICE OF THE POSSIBILITY OF AN ERROR BEFORE THE BID WAS ACCEPTED.

WHILE A WIDE RANGE OF BID PRICES IN SURPLUS SALES ORDINARILY IS NOT ENOUGH TO PUT THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF AN ERROR BECAUSE OF THE VARIETY OF USES TO WHICH THE SURPLUS PROPERTY MAY BE PUT, WHEN CONSIDERATION IS GIVEN TO THE DISPARITY IN THE PRICE BID BY OCEAN TOGETHER WITH THE FACT THAT THERE WAS CONFLICTING INFORMATION CONTAINED IN THE BID ITSELF WHICH SHOULD HAVE ALERTED THE CONTRACTING OFFICER TO THE POSSIBILITY OF AN ERROR, WE THINK THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE, AS HE NOW ADMITS, OF A POSSIBLE MISTAKE IN THE CONTRACTOR'S BID AND HE SHOULD NOT HAVE ACCEPTED THE BID WITHOUT VERIFICATION.

ACCORDINGLY, WE AGREE WITH THE CONTRACTING OFFICER'S RECOMMENDATION THAT THE SUBJECT CONTRACT BE RESCINDED WITHOUT ANY LIABILITY TO THE CONTRACTOR.