B-160208, OCT. 28, 1966

B-160208, OCT. 28, 1966

TO DIRECTOR, DEFENSE SUPPLY AGENCY:

BY LETTER DATED OCTOBER 5, 1966, WITH ENCLOSURES (YOUR REFERENCE DSAH-G), MR. R. F. S. HOMANN, ASSISTANT COUNSEL, HAS REQUESTED OUR DECISION WHETHER SURPLUS SALES CONTRACT NO. 11-7004-095, DATED JULY 29, 1966, MAY BE RESCINDED BY THE DEFENSE LOGISTICS SERVICES CENTER BECAUSE OF A MISTAKE IN BID ALLEGED BY THE PURCHASER AFTER AWARD. THE CONTRACT COVERS AWARD TO WASHINGTON IRON AND METAL COMPANY, INC., OF ITEM 6, 30,000 POUNDS OF SCRAP MISCELLANEOUS ELECTRONIC EQUIPMENT, OFFERED FOR SALE UNDER SALES INVITATION 11-7004, ISSUED JULY 6, 1966, BY THE DEFENSE SURPLUS SALES OFFICE, PHILADELPHIA, PENNSYLVANIA.

IN AN AFFIDAVIT DATED AUGUST 2, 1966, THE PURCHASER ADVISED THE CONTRACTING OFFICER THAT ITS BID HAD BEEN ERRONEOUSLY SUBMITTED ON ITEM NO. 6, COVERING MISCELLANEOUS SCRAP ELECTRONIC EQUIPMENT, WHEREAS IT HAD BEEN INTENDED FOR ITEM NO. 7, COVERING STAINLESS STEEL, MAGNETIC AND NON- MAGNETIC SCRAP. ACCORDINGLY, THE PURCHASER REQUESTED THAT WITHDRAWAL OF THE BID BE PERMITTED.

THE BIDS RECEIVED ON THE ITEMS WERE AS FOLLOWS:

TABLE

ITEM NO. 6

BIDDERS BID PRICE (PER POUND)

WASHINGTON IRON AND METAL CO. $ .08358

FERTIK AND COMPANY .01271

ELECTRONICS .0086

S. YAFFA'S SONS .005699

ITEM NO. 7

INTERNATIONAL ALLOYS, INC. $ .0868

H. KLAFF AND COMPANY .0812

METROPOLITAN METALS, INC. .07898

COLONIAL SALVAGE AND SCRAP CO..0459

WE NOTE THAT THE PURCHASER'S BID PRICE OF $ .08358 ON ITEM 6 IS VERY CLOSE TO THE TWO HIGHEST BIDS RECEIVED ON ITEM 7 WHICH TENDS TO SUPPORT THE PURCHASER'S CLAIM THAT IT COMMITTED A BONA FIDE ERROR.

THE CONTRACTING OFFICER REPORTS THAT THE MARKET APPRAISAL FOR ITEM 6 WAS $ .01 AND THAT A SALE OF SIMILAR SCRAP ON MAY 25, 1966, BROUGHT PRICES OF $ .0169 AND $ .0266, AND IT IS OUR UNDERSTANDING THAT SUCH FACTORS WERE KNOWN TO THE CONTRACTING OFFICER PRIOR TO THE AWARD. ACCORDINGLY, AND IN VIEW OF THE WIDE VARIATION BETWEEN THE HIGH BID AND THE OTHER BIDS ON ITEM NO. 6, THE CONTRACTING OFFICER RECOMMENDS THAT THE PURCHASER'S REQUEST FOR RELIEF BE GRANTED. FURTHER ON THE BASIS THAT THE DISPARITY BETWEEN THE PURCHASER'S BID AND THE MARKET APPRAISAL AND RECENT SALE PRICES WAS SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF ERROR, THUS REQUIRING VERIFICATION OF THE BID PRIOR TO AWARD, BOTH THE ASSISTANT COUNSEL AND THE DEFENSE LOGISTICS SERVICES CENTER RECOMMEND THAT THE AWARD BE RESCINDED.

IN SALIGMAN V. UNITED STATES, 56 F.SUPP. 505, 507, IT WAS HELD THAT IF A UNILATERAL MISTAKE IN BID WAS ALLEGED BY A CONTRACTOR AFTER AWARD, THE CONTRACTOR NEVERTHELESS WOULD BE BOUND BY HIS CONTRACT AND MUST BEAR THE CONSEQUENCES OF HIS MISTAKE--- UNLESS THE CONTRACTING OFFICER KNEW, OR HAD REASON TO KNOW, OF THE MISTAKE AT THE TIME OF BID ACCEPTANCE. SEE, ALSO, C. N. MONROE MANUFACTURING COMPANY V. UNITED STATES, 143 F.SUPP. 449. IF KNOWLEDGE OF THE MISTAKE MAY BE IMPUTED TO THE CONTRACTING OFFICER, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. SEE 5 WILLISTON, CONTRACTS, SEC. 1578; KEMP V. UNITED STATES, 38 F.SUPP. 568, WENDER PRESSES, INC. V. UNITED STATES 343 F.2D 961.

SINCE THIS WAS A SALE OF SURPLUS PROPERTY, THE MERE FACT THAT THERE WAS A WIDE DISPARITY (APPROXIMATELY 650 PERCENT) BETWEEN THE BID OF THE PURCHASER AND THE SECOND HIGH BID WOULD NOT NECESSARILY BE SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF THE PURCHASER'S MISTAKE, AS WOULD A LIKE DIFFERENCE IN THE PRICES BID ON NEW EQUIPMENT. SEE UNITED STATES V. SABIN METAL CORP., 151 F.SUPP. 683, 689, CITING WITH APPROVAL 16 COMP. GEN. 596. HOWEVER, IN SURPLUS SALES CASES IN WHICH THE PRESENCE OF ADDITIONAL CIRCUMSTANCES KNOWN TO THE CONTRACTING OFFICER AT THE TIME OF AWARD COULD BE SAID TO CONSTITUTE NOTICE OF A MISTAKE IN BID, OUR OFFICE HAS ALLOWED RESCISSION OF THE SALES CONTRACTS. FOR EXAMPLE, WE HAVE HELD THAT A BID WHICH WAS MORE THAN 88 PERCENT OF THE ACQUISITION COST OF A SURPLUS PROPERTY ITEM WAS SUFFICIENT TO PUT THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THE BID. SEE B-146136, JULY 14, 1961. SEE ALSO B-157656, SEPTEMBER 23, 1965. FURTHER, CANCELLATION OF A CONTRACT FOR THE SALE OF SCRAP WAS PERMITTED WHERE THE ALLEGED ERRONEOUS HIGH BID EXCEEDED THE CURRENT MARKET APPRAISAL OF THE PROPERTY BY OVER 80 PERCENT. B-158334, JANUARY 21, 1966.

IN THE INSTANT CASE, IT IS OUR VIEW THAT THE CONTRACTING OFFICER'S KNOWLEDGE, AT THE TIME OF THE AWARD, OF THE SIGNIFICANT DIFFERENCES BETWEEN THE HIGH BID AND THE MARKET APPRAISAL OF ITEM NO. 6 (OVER 800 PERCENT) AND THE HIGH BID AND RECENT PRICES REALIZED FROM THE SALE OF SIMILAR PROPERTY (NEARLY 400 PERCENT) WAS SUFFICIENT, WHEN COUPLED WITH THE WIDE VARIANCE BETWEEN THE HIGH BID AND OTHER BIDS ON THE ITEM, TO HAVE PLACED HIM ON NOTICE OF THE POSSIBILITY OF A MISTAKE IN THE HIGH BID AND THEREFORE NECESSITATED CONFIRMATION OF THE HIGH BID BEFORE AWARD. 130968, MARCH 28, 1957.

ACCORDINGLY, AND SINCE THE ERROR WAS ALLEGED PROMPTLY UPON RECEIPT OF THE NOTICE OF AWARD, THE CONTRACT MAY BE RESCINDED AND THE DEPOSIT PAID ON THE ITEM MAY BE REFUNDED TO THE PURCHASER.