B-160695, JAN. 31, 1967

B-160695, JAN. 31, 1967

TO DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO A LETTER (DSAH-G) DATED JANUARY 17, 1967, WITH ENCLOSURES, FROM YOUR ASSISTANT COUNSEL, HEADQUARTERS, CAMERON STATION, CONCERNING THE REQUEST OF THE FREESTYLE SALES COMPANY, HOLLYWOOD, CALIFORNIA, THAT SALES CONTRACT NO. 44-7005-065, AWARDED BY THE DEFENSE SURPLUS SALES OFFICE, OAKLAND, CALIFORNIA, BE RESCINDED BECAUSE OF A MISTAKE IN BID ALLEGED AFTER AWARD.

INVITATION FOR BIDS (IFB) NO. 44-7055 WAS ISSUED ON JULY 15, 1966, FOR THE SALE OF MISCELLANEOUS ITEMS OF GOVERNMENT SURPLUS PROPERTY CONSISTING OF HARDWARE, DENTAL UNITS, HAND TOOLS, CHEMICALS, HOSPITAL EQUIPMENT AND COMPRESSED GAS CYLINDERS. BIDS WERE OPENED ON JULY 28, 1966. FREESTYLE SALES SUBMITTED A BID OF $1,976.77 ON ITEM 2 WHICH CONSISTED OF MISCELLANEOUS SCREWS WHICH, IN THE GOVERNMENT'S OPINION, APPEARED TO BE IN EXCELLENT CONDITION, HAD A TOTAL COST OF $9,949.37, AND HAD AN ESTIMATED TOTAL WEIGHT OF 4,921 POUNDS. THE BID OF FREESTYLE SALES COMPANY WAS THE HIGHEST BID RECEIVED ON ITEM 2 AND THAT ITEM WAS AWARDED TO THE COMPANY ON AUGUST 1, 1966.

FREESTYLE SALES ALLEGED THAT ITS BID OF $1,976.77 ON ITEM 2 WAS INTENDED FOR ITEM 29 BUT, THROUGH ERROR, IT WAS INADVERTENTLY STATED TO BE FOR ITEM 2. ITEM 29 WAS OFFERED AS ONE LOT OF UNUSED PHOTOGRAPHIC FILM HAVING AN ACQUISITION COST OF $12,194.20. THE COMPANY FURTHER STATES THAT IT IS IN THE PHOTOGRAPHIC BUSINESS AND HAS A RECORD OF BIDDING AT THE SURPLUS SALES OFFICE SINCE 1946 AND HAS ALWAYS BID ON PHOTO MATERIAL ONLY. IN SUPPORT OF ITS ALLEGATION OF MISTAKE, THE COMPANY HAS SUBMITTED WORKSHEETS INDICATING ITS INTENTION TO BID ON ITEM 29 ONLY.

THE SECOND HIGH BID SUBMITTED ON ITEM 2 WAS $293 AND THE THREE OTHER BIDS ON THE ITEM RANGED FROM $149.50 TO $9.95. PRIOR TO THE OPENING OF BIDS, A CURRENT MARKET APPRAISAL OF $175 HAD BEEN ESTABLISHED FOR THE ITEM. THE SALE CONTRACTING OFFICER REPORTS THAT, AT THE TIME OF THE AWARD OF ITEM 2, HE WAS NOT ON ACTUAL NOTICE OF A POSSIBLE MISTAKE IN BID, ALTHOUGH FREESTYLE'S BID OF $1,976.77 WAS 674 PERCENT OF THE NEXT HIGH BID, 1129 PERCENT OF THE CURRENT MARKET APPRAISAL, AND EXCEEDED BIDS ACCEPTED ON OTHER ITEMS OF MISCELLANEOUS SCREWS BY A SUBSTANTIAL AMOUNT. HOWEVER, THE BID REPRESENTED 19 PERCENT OF THE ACQUISITION COST OF THE PROPERTY.

ORDINARILY A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT SUFFICIENT TO PLACE A CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR BECAUSE OF THE WIDE VARIETY OF USES TO WHICH THE SURPLUS MAY BE PUT. HOWEVER, WE ARE OF THE OPINION THAT THE DISPARITY BETWEEN THE BID OF FREESTYLE SALES AND THE NEXT HIGHEST BID AND THE MARKET APPRAISAL, TOGETHER WITH THE FACT BIDS ON OTHER ITEMS OF MISCELLANEOUS SCREWS WERE SUBSTANTIALLY LOWER, ARE SUFFICIENT TO SUPPORT THE CONCLUSION THAT THE CONTRACTING OFFICER WAS PLACED ON CONSTRUCTIVE NOTICE OF THE ERROR AND THAT THE BID SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD.

ACCORDINGLY, THIS OFFICE HAS NO OBJECTION TO RESCISSION OF THE CONTRACT.