B-162043, JUL. 26, 1967

B-162043, JUL. 26, 1967

CONTRACTS - MISTAKES - REFORMATION DECISION TO GSA CONCERNING PRICE MISTAKE IN A CONTRACT FOR RUGS. SOLE BIDDER WHO, AFTER AWARD, ALLEGES THAT PRICES QUOTED FOR RUGS OF DIFFERENT SIZES WERE ERRONEOUSLY COMPUTED ON OTHER SIZES MAY HAVE THE CONTRACT REFORMED ON THE BASIS THAT EVEN THOUGH ONLY ONE BID WAS RECEIVED THE BIDDER WAS PRESENTLY FURNISHING RUGS UNDER A SIMILAR PROCUREMENT AND, THEREFORE, THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF ERROR. HOWEVER, EVEN THOUGH RECORD LEAVES LITTLE DOUBT OF ERRONEOUS BID, INTENDED PRICES ARE NOT CLEARLY ESTABLISHED. THEREFORE, ALTHOUGH CONTRACTOR REQUESTS INCREASE TO $22.50 FOR 4X6 FEET RUGS SUCH PRICE IS NOT CONSIDERED FAIR AND REASONABLE AND CONTRACTOR MAY NOT BE ALLOWED MORE THAN IS BEING PAID UNDER CURRENT CONTRACT FOR SAME SIZE FURNISHED BY ANOTHER CONTRACTOR, AND FOR THE SMALLER SIZED RUG THE CONTRACTOR MAY BE ALLOWED PRICE ACTUALLY BID FOR THE LARGE SIZE.

TO THE HONORABLE LAWSON B. KNOTT, JR., ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO A LETTER DATED JULY 12, 1967, WITH ENCLOSURES, FROM YOUR GENERAL COUNSEL, REQUESTING OUR CONSIDERATION OF A PROPOSED REFORMATION OF A CONTRACT WITH KELLOGG BROTHERS COMPANY, INC., WHICH WOULD INCREASE THE CONTRACT PRICE FROM $5,548.40 TO $7,569.40 ON ACCOUNT OF A MISTAKE IN BID WHICH WAS ALLEGED SHORTLY AFTER AWARD OF CONTRACT NO. GS- 098-20142.

IT IS REPORTED THAT THE CONTRACTOR SUBMITTED THE ONLY BID ON THE INVITATION WHICH SOUGHT TO PROCURE DEFINITE QUANTITIES OF THROW RUGS, SIZES 3 FEET X 5 FEET AND 4 FEET X 6 FEET. KELLOGG WAS AWARDED THE CONTRACT WITHOUT VERIFICATION ON THE BASIS OF $11.00 EACH FOR 3 FEET X 5 FEET RUGS F.O.B. ORIGIN, LEVEL C PACK, AND $13.20 EACH FOR 4 FEET X 6 FEET RUGS F.O.B. ORIGIN, LEVEL C PACK. SUBSEQUENT TO AWARD THE CONTRACTOR ALLEGED ERROR IN COMPUTING THE QUOTED PRICES AND ADVISED THAT IT HAD MISTAKENLY UTILIZED THE PRICE QUOTED BY ITS SUPPLIER ON THE 3 FEET X 4 FEET SIZE AS THE BASIS FOR ITS QUOTATION ON THE 3 FEET X 5 FEET RUG AND THE PRICE OF THE 3 FEET X 5 FEET SIZE AS THE BASIS OF ITS PRICE ON THE 4 FEET X 6 FEET RUG. IT IS THE OPINION OF THE CONTRACTING OFFICER, AND YOUR GENERAL COUNSEL AGREES, THAT PRIOR TO AWARD THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF ERROR IN THE BID. IN VIEW OF RECENT EXPERIENCES IN PROCUREMENTS FOR THESE ITEMS IT IS BELIEVED THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ALERTED TO THE POSSIBILITY OF ERROR IN PRICE DESPITE THE ABSENCE OF OTHER BIDDERS ON THE REQUIREMENT IN POINT, SINCE QUANTITIES OF IDENTICAL 3 FEET X 5 FEET RUGS WERE PURCHASED RECENTLY FROM KELLOGG FOR $13.90 EACH AND IDENTICAL 4 FEET X 6 FEET RUGS WERE PURCHASED FROM ANOTHER SUPPLIER FOR $21.20 EACH. IN THE INSTANT PROCUREMENT KELLOGG QUOTED $11.00 AND $13.20, RESPECTIVELY, WHICH IT NOW ALLEGES, AND CORRESPONDENCE FROM ITS SUPPLIER SUBSTANTIATES, ARE PRICED BELOW ITS ACTUAL COSTS FOR THE ITEMS.

AS A GENERAL RULE, WHEN A UNILATERAL ERROR IS ALLEGED AFTER AWARD, THE CONTRACT IS NOT SUBJECT TO REFORMATION SINCE A BINDING AND ENFORCEABLE CONTRACT ARISES UPON ACCEPTANCE. SALIGMAN V. UNITED STATES, 56 F. SUPP. 505, AND CASES CITED THEREIN. THIS GENERAL RULE, HOWEVER, IS NOT FOR APPLICATION WHERE THE CIRCUMSTANCES ARE SUCH THAT THE CONTRACTING OFFICER HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE PROBABILITY OF ERROR PRIOR TO AWARD. IN SUCH CASES, ACCEPTANCE BY THE CONTRACTING OFFICER DOES NOT RESULT IN A BINDING CONTRACT AND EITHER OUR OFFICE OR THE COURTS WILL ALLOW APPROPRIATE RELIEF. 37 COMP. GEN. 685; 17 COMP. GEN. 575. ALTHOUGH IN CASES WHERE ONLY ONE BID IS RECEIVED THERE IS GENERALLY LITTLE REASON FOR THE CONTRACTING OFFICER TO BE ON NOTICE OF THE PROBABILITY OF AN ERROR IN BID, WE FEEL THAT SUFFICIENT JUSTIFICATION EXISTS IN THIS CASE IN VIEW OF THE CLOSE PROXIMITY BETWEEN THE SUBJECT CONTRACT AND THE PAST PROCUREMENTS FOR IDENTICAL ITEMS. FURTHERMORE THE RECORD LEAVES LITTLE DOUBT THAT THE CORPORATION'S BID WAS ERRONEOUS, AND TO COMPEL THE CORPORATION TO FURNISH THE RUGS FOR A TOTAL PRICE WHICH IS CONSIDERABLY LESS THAN THEIR ACQUISITION COST WOULD APPEAR TO BE UNCONSCIONABLE UNDER THE CIRCUMSTANCES. SEE B-146413, AUGUST 1, 1961, AND B-159939, SEPTEMBER 8, 1966.

HOWEVER, SINCE THE CONTRACTOR HAS BEEN UNABLE TO CLEARLY ESTABLISH ITS INTENDED BID, A QUESTION ARISES AS TO THE EXTENT OF RELIEF ALLOWABLE. THE CONTRACTING OFFICER HAS CONCLUDED THAT KELLOGG'S ALLEGED INTENDED PRICE OF $13.50 EACH FOR 322 OF THE 3 FEET X 5 FEET RUGS IS ACCEPTABLE SINCE IT IS FAIR AND REASONABLE WHEN COMPARED TO A PRICE OF $13.90 EACH IN A RECENT PROCUREMENT OF 154 RUGS OF THAT SIZE, BUT THAT THE REQUESTED INCREASE TO $22.90 IS NOT CONSIDERED FAIR AND REASONABLE FOR THE 4 FEET X 6 FEET RUGS SINCE THE GOVERNMENT SHOULD NOT PAY MORE THAN ITS LAST CONTRACT PRICE OF $21.20 FOR THE ITEM. WE AGREE WITH THE LATTER CONCLUSION AND WOULD HAVE NO OBJECTION TO INCREASING THE PRICE FOR THE 4 FEET X 6 FEET RUGS TO $21.20. HOWEVER, SINCE IT WOULD APPEAR THAT KELLOGG'S MISTAKEN BID ON THE 4 FEET X 6 FEET RUGS WAS ACTUALLY THE PRICE IT INTENDED TO BID FOR THE 3 FEET X 5 FEET RUGS, IT IS OUR OPINION THAT THE INCREASE IN PRICE FOR THE 3 FEET X 5 FEET RUGS SHOULD BE LIMITED TO THE PRICE OF $13.20 EACH ACTUALLY BID ON THE 4 FEET X 6 FEET RUGS.

AS REQUESTED, THE ADMINISTRATIVE FILE OF THE CASE IS RETURNED HEREWITH.