B-160536, FEB. 13, 1967

B-160536, FEB. 13, 1967

TO BURLINGHAM UNDERWOOD BARRON WRIGHT AND WHITE:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 7, 1966, WITH ENCLOSURES, ON BEHALF OF THE UNION MINERALS AND ALLOYS CORPORATION, REQUESTING RELIEF FROM AN AWARD MADE UNDER MARITIME ADMINISTRATION SALES INVITATION NO. PD-X-741, ON THE BASIS OF AN ALLEGED MISTAKE IN ITS BID FOR THE SS GLEN GERALD GRISWOLD.

THE INVITATION OFFERED EIGHT SHIPS FOR SALE AND SCRAPPING, INCLUDING THE SS GLEN GERALD GRISWOLD, A FORMER NAVY PORT REPAIR SHIP (BASIC DESIGN N3-M -A1) LAID UP AT THE JAMES RIVER RESERVE FLEET. THE LIGHTSHIP WEIGHT FOR A STANDARD SHIP OF THE N3-M-A1 CLASS IS REPORTED TO BE 1,130 ONES; HOWEVER, CONVERSION TO A PORT REPAIR SHIP CAN BE CONSIDERED TO HAVE INCREASED THIS TONNAGE BY SEVERAL HUNDRED TONS. ABOARD THE GRISWOLD WERE NUMEROUS ITEMS OF EQUIPMENT, SUCH AS SPARE TAIL SHAFT, SPARE PROPELLER (BRONZE), CRANE, A NUMBER OF EXTRA COMPRESSORS, SEVERAL GENERATORS, AN EVAPORATOR, WELDER AND SOME HAND TOOLS, DIESEL PROPULSION ENGINE AND 1,837 BARRELS OF DIESEL OIL.

SECTION V OF THE INVITATION REQUIRED THAT A BID DEPOSIT OF 25 PERCENT OF THE BID PRICE ACCOMPANY THE BID, AND SECTION VI (B) PROVIDED: "TELEGRAPHIC BIDS WILL NOT BE CONSIDERED, BUT MODIFICATIONS BY TELEGRAPH OF BIDS ALREADY SUBMITTED WILL BE CONSIDERED IF RECEIVED PRIOR TO THE TIME FIXED FOR THE RECEIPT OF BIDS.' BIDDERS WERE ADVISED THAT BIDS WOULD BE RECEIVED UNTIL 2:15 P.M., OCTOBER 12, 1966, AND THAT THEY WOULD BE OPENED AT 2:30 P.M. ON THAT DAY.

UNION MINERALS SUBMITTED A BID ON OCTOBER 11, 1956, OF $53,335, FOR THE GRISWOLD AND $66,300 FOR A SECOND SHIP, THE SS GENEVA. THE BID WAS ACCOMPANIED BY THREE CERTIFIED CHECKS TOTALLING $35,000 IN COMPLIANCE WITH THE 25 PERCENT BID DEPOSIT REQUIREMENT. UNION MINERALS ALSO DISPATCHED A TELEGRAM WHICH ARRIVED AT THE MARITIME ADMINISTRATION TELETYPE UNIT AT 9:12 A.M. ON OCTOBER 12, READING AS FOLLOWS:

"REFERENCE INVITATION PD-X-741, WE HEREWITH INCREASE OUR BID FOR SS GLEN GERALD GRISWOLD BY TEN THOUSAND SEVEN HUNDRED SIXTY-FIVE DOLLARS.'

THE BID AS AMENDED FOR THE GRISWOLD AMOUNTING TO $64,100 WAS OPENED AND READ AT THE SCHEDULED BID OPENING TIME. FOLLOWING BID OPENING, AT APPROXIMATELY 3:30 P.M., MR. SOTEL OF UNION MINERALS CALLED THE SALES OFFICE BY TELEPHONE STATING THAT THERE WAS A MISTAKE IN BIDDING--- THAT THE TELEGRAM AMENDING THE BID WAS INTENDED TO "DECREASE" AND NOT "INCREASE" THE ORIGINAL BID OF $53,335 ON THE SS GRISWOLD. THE FOLLOWING WIRE DISPATCHED AT 4:05 P.M., E.D.T., OCTOBER 12, BY BERNARD STUMIN OF UNION MINERALS WAS RECEIVED IN THE SALES OFFICE MARAD TELETYPE UNIT AT 7:39 .M., OCTOBER 13:

"OUR TELEGRAM THIS MORNING SHOULD HAVE READ DECREASE INSTEAD OF INCREASE BID FOR SS GLEN GERALD GRISWOLD. WE INTENDED TO BID FORTY TWO THOUSAND FIVE HUNDRED SEVENTY DOLLARS.'

THE SALES OFFICE ADVISED THE BIDDER BY WIRE AT 4:30 P.M., OCTOBER 13, 1966, THAT ITS CLAIMED MISTAKE IN BID WAS NOT SUFFICIENT TO JUSTIFY DECREASING THE BID OF $64,100 FOR THE GRISWOLD. THEREAFTER ON OCTOBER 18, 1966, THE BIDDER SUBMITTED CERTAIN DOCUMENTS TO SUBSTANTIATE ITS CLAIM OF ERROR. THESE CONSISTED OF AN AFFIDAVIT DATED OCTOBER 18, 1966, FROM DAVID BARASH, AN EMPLOYEE OF UNION, STATING THAT HE HAD PERSONALLY INSPECTED THE SHIP AT THE FLEET SITE ON OCTOBER 4, 1966; THAT HE HAD PREPARED AND DELIVERED TO MR. HUGO NEU (PRESIDENT OF UNION MINERALS) AN INSPECTION REPORT DATED OCTOBER 7, 1966, TO BE USED BY MR. NEU FOR BIDDING PURPOSES; AND THAT ON OCTOBER 12 MR. NEU HAD CALLED HIM (BARASH) INTO THE OFFICE AND TOLD HIM TO MODIFY THE BID--- TO "INCREASE" THE BID, AFTER WHICH MR. BARASH REQUESTED MR. SOTEL TO TELEGRAPH THE SALES OFFICE TO SO CHANGE THE BID. THIS AFFIDAVIT DOES NOT INDICATE THE DOLLAR AMOUNT INVOLVED IN THE BID MODIFICATION BUT DOES STATE THAT MR. NEU WAS USING THE TELEPHONE AT THE TIME AND NOTHING WAS SAID AS TO THE REASON FOR MODIFICATION. MR. BARASH'S INSPECTION REPORT, IN ADDITION TO DESCRIBING THE SHIP'S CONDITION, STATED THAT CONSIDERABLE EQUIPMENT, IN FAIR CONDITION, IS ABOARD, VALUED AT $50,000, PLUS 1,800 BARRELS OF DIESEL FUEL VALUED AT $5,000. HE FURTHER STATED THAT SCRAPPING THE SHIP SHOULD YIELD 20,000 POUNDS OF NON-FERROUS METAL AND 1,000 TONS OF FERROUS SCRAP. IN ADDITION, THERE IS THE AFFIDAVIT OF MR. NEU, DATED OCTOBER 18, 1966, STATING THAT HE READ BARSH'S REPORT ON OCTOBER 11, AND THAT AFTER CONSIDERING THE VARIOUS FACTORS HE BELIEVED THAT THE BID SHOULD BE $53,335; THAT ON OCTOBER 12 HE REVIEWED THE BID ALREADY SUBMITTED AND DECIDED TO REDUCE IT BECAUSE THE EARLIER APPRAISAL WAS TOO LIBERAL; AND THAT HE CALLED BARASH INTO HIS OFFICE AND TOLD HIM TO MODIFY THE BID. MR. NEU STATED THAT IT WAS HIS INTENTION TO INSTRUCT MR. BARASH TO HAVE THE BID DECREASED BY $10,570 AND THAT, SINCE MR. BARASH WAS OF THE IMPRESSION THAT MR. NEU TOLD HIM TO INCREASE THE BID BY THAT AMOUNT, MR. NEU STATED "I SUPPOSE IT IS POSSIBLE THAT INADVERTENTLY I USED THE WORD ,INCREASE" INSTEAD OF INTENDED "DECREASE.'" MR. NEU STATED THAT MR. BARASH ARRANGED WITH MR. SOTEL TO PREPARE AND DISPATCH THE TELEGRAM TO THE SALES OFFICE; THAT HE (NEU) DID NOT DISCUSS THE MATTER WITH SOTEL NOR DID HE SEE THE WIRE BEFORE IT WAS SENT; AND THAT HE DID NOT KNOW OF ITS CONTENT UNTIL THE MISTAKE WAS DISCOVERED.

IN THE BRIEF ENCLOSED WITH YOUR LETTER OF DECEMBER 7, 1966, YOU REFER TO THE RULE OF CONTRACT LAW THAT IF A MATERIAL UNILATERAL MISTAKE IS KNOWN TO THE OTHER PARTY OR BECAUSE OF ACCOMPANYING CIRCUMSTANCES THE OTHER PARTY HAD REASON TO KNOW OF IT, THE PARTY MAKING THE MISTAKE HAS THE RIGHT TO RESCIND. YOU CONTEND THAT UNION MINERALS AMPLY DEMONSTRATED THE FACT THAT IT MADE A BONA FIDE ERROR AND THAT THE CONTRACTING OFFICER SHOULD HAVE INQUIRED INTO THE POSSIBILITY OF ERROR WHEN IT WAS OR SHOULD HAVE BEEN CLEAR TO HIM BASED UPON PREVIOUS SIMILAR SALES AND FROM THE RANGE OF BIDS ON THIS ONE. THEREFORE, YOU ARGUE THAT A SUFFICIENT BASIS EXISTS TO RELIEVE THE CONTRACTOR FROM THE CONSEQUENCES OF ITS ERROR. IN THAT LIGHT, YOU REQUEST THAT THE AWARD OF THE SS GRISWOLD BE CANCELLED WITH REFUND OF THE BID DEPOSIT APPLICABLE TO THE BID FOR THE SS GRISWOLD WHICH HAS BEEN RETAINED BY THE SALES OFFICE AS LIQUIDATED DAMAGES ARISING OUT OF UNION MINERAL'S REFUSAL TO TAKE DELIVERY OF THAT SHIP.

THE BASIC QUESTION FOR CONSIDERATION IS WHETHER THE ACCEPTANCE OF THE BID WITH NOTICE OF THE ALLEGATION OF ALLEGED ERROR CONSUMMATED A VALID AND BINDING CONTRACT.

UPON A CAREFUL REVIEW OF THE CIRCUMSTANCES INVOLVED IN THE CLAIM OF ERROR IN BID, THE AFFIDAVITS OF RECORD AND OTHER PERTINENT AVAILABLE EVIDENCE, THE CONTRACTING OFFICER CONCLUDED THAT NO CLEAR AND CONVINCING EVIDENCE OF MISTAKE EXISTED AND, THEREFORE, HE ACCEPTED THE BID AS SUBMITTED AND OPENED.

IN 36 COMP. GEN. 441 WE STATED THE GENERAL RULE THAT ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT, AND REMARKED THAT "IN 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.' THIS, OF COURSE, PRESUPPOSES THAT THE BIDDER HAS FURNISHED SUFFICIENT EVIDENCE TO MAKE A PRIMA FACIE CASE IN SUPPORT OF HIS ALLEGED ERROR. WHERE, AS HERE, A MISTAKE IN BID IS ALLEGED AFTER BID OPENING BUT BEFORE AWARD AND THERE HAS NOT BEEN PRESENTED, IN THE CONSIDERED JUDGMENT OF THE CONTRACTING OFFICER, CLEAR AND CONVINCING EVIDENCE OF THE MISTAKE, HOW IT OCCURRED, AND WHAT THE BID WOULD HAVE BEEN BUT FOR THE MISTAKE, THE INTERESTS OF THE GOVERNMENT REQUIRE THAT THE BID BE CONSIDERED AS SUBMITTED. IN THE PRESENT CASE, WE FIND NOTHING IN THE RECORD TO JUSTIFY OUR OFFICE OVERRULING THE CONTRACTING OFFICER. A CONTEMPORANEOUS ALLEGATION OF ERROR WITH BID OPENING UNDER THE CIRCUMSTANCES RELATED ABOVE WHEREIN THE BIDDER HAD THE CLEAR OPTION TO CHANGE HIS PRICE DEPENDING UPON THE RELATIVE STANDINGS OF THE OTHER BIDDERS DOES NOT, IN OUR OPINION, LEND ITSELF TO THE APPLICATION OF THE RULES STATED IN YOUR BRIEF OR AS RECOGNIZED BY OUR OFFICE. 36 COMP. GEN. 641. AS DISCUSSED BELOW, WE FIND NO LEGAL BASIS TO DISTURB THE ADMINISTRATIVE ACTIONS TAKEN IN THE MATTER.

THE GENERAL RULE IS THAT RELIEF WILL NOT BE GRANTED TO A BIDDER ALLEGING A UNILATERAL MISTAKE AFTER BIDS HAVE BEEN OPENED AND MADE PUBLIC, UNLESS THE ERROR WAS SO APPARENT THAT IT MUST BE PRESUMED THE CONTRACTING OFFICER KNEW OF THE MISTAKE AND SOUGHT TO TAKE ADVANTAGE THEREOF. SALIGMAN, ET AL. V. UNITED STATES, 56 F.SUPP. 505 (D.C.E.D. PA. 1944). WHERE THERE IS A MATERIAL DIFFERENCE IN THE PRICE QUOTED ON NEW SUPPLIES OR EQUIPMENT TO BE FURNISHED TO THE GOVERNMENT, AS COMPARED WITH THE RANGE OF PRICES CONTAINED IN ALL THE OTHER BIDS, THE CONTRACTING OFFICER IS ON CONSTRUCTIVE NOTICE THAT THE BIDDER MAY HAVE MADE AN ERROR AND VERIFICATION MUST BE REQUESTED FROM THE BIDDER BEFORE A VALID AWARD MAY BE MADE. HOWEVER, IN VIEW OF THE WIDE RANGE OF PRICES ORDINARILY RECEIVED ON SCRAP SALVAGE, AND SURPLUS PROPERTY, A MERE DIFFERENCE IN THE BID PRICES WOULD NOT NECESSARILY PLACE A CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN A BID FOR SUCH PROPERTY. PRICES OFFERED TO THE GOVERNMENT FOR ITS SURPLUS PROPERTY ARE BASED MORE OR LESS UPON THE USE TO WHICH THE PROPERTY IS TO BE PUT BY THE PARTICULAR BIDDER OR UPON THE RISK OF RESALE WHICH THE BIDDER MIGHT WISH TO TAKE. UNITED STATES V. SABIN METAL CORPORATION, 151 F.SUPP. 683, AFFIRMED 253 F.2D 956, CITING WITH APPROVAL 16 COMP. GEN. 596; 17 ID. 388 AND ID. 601. IN THE SABIN CASE, THE PRICE DISPARITY IN BIDS RECEIVED FOR THE SALE OF SURPLUS PROPERTY RANGED FROM A LOW OF $337.38 TO A HIGH OF $9,351.30. AT PAGE 688, THE COURT SAID:

"THIS BEING A SALE OF SURPLUS ENGINE PARTS, THE CONTRACTING OFFICER HAD NO METHOD OF KNOWING THAT THERE WAS AN ERROR IN THE DEFENDANT'S BID. THE GOVERNMENT WAS INTERESTED ONLY IN GETTING THE HIGHEST POSSIBLE PRICE FOR THE MATERIAL TO BE SOLD; IT WAS NOT IN THE METAL TRADE. THERE IS NO REASON WHY THE SPREAD IN BIDS SHOULD HAVE APPEARED PALPABLE TO THE GOVERNMENT. THE ADMINISTRATIVE AGENCY WAS NOT REQUIRED TO EMPLOY OR UTILIZE EXPERTS FOR THE BENEFIT OF THE DEFENDANT, NOR TO ASSUME THE BURDEN OF EXAMINING EVERY LOW BID FOR POSSIBLE ERROR BY THE BIDDER.'

SEE, ALSO, WENDER PRESSES, INC. V. UNITED STATES, 343 F.2D 961.

WHILE UNION MINERAL'S HIGH BID OF $64,100 WAS OVER TWICE THE AMOUNT OF THE SECOND HIGH BIDDER, $26,888.88, IT IS SHOWN THAT THE GRISWOLD, BY REASON OF CONVERSION WORK WHICH IN THE PAST HAD BEEN PERFORMED UPON THE SHIP AND THE SPECIAL EQUIPMENT ON BOARD, WOULD HAVE A VERY HIGH VALUE TO A BIDDER WHO HAD A MARKET FOR THE HIGH VALUE SALVAGE TO BE SECURED. FURTHER APPEARS THAT THE BID WAS BASED UPON ITS OWN APPRAISAL OF THE VALUE OF THE SHIP AND ITS EQUIPMENT.

THE ALABAMA OXYGEN COMPANY, INC. CASE, NO. B-158507, AUGUST 1, 1966, REFERRED TO IN YOUR BRIEF, IS CLEARLY DISTINGUISHABLE FROM THE PRESENT CASE SINCE IN THE ALABAMA CASE SUFFICIENT EVIDENCE WAS PRESENTED TO ESTABLISH THE FACT OF ERROR.

UPON REVIEW, IT MUST BE CONCLUDED THAT THE ACCEPTANCE OF THE BID WAS PROPER AND THE RESULTING AWARD CONSUMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND OBLIGATIONS OF THE PARTIES. SEE 17 COMP. GEN. 532; ID. 534. THEREFORE, WE ARE UNABLE TO AUTHORIZE REFUND OF $16,025, REPRESENTING THE AMOUNT OF THE BID BOND APPLICABLE TO UNION MINERAL'S BID FOR THE SS GRISWOLD.