B-163374, FEB. 15, 1968

B-163374, FEB. 15, 1968

CONTRACTS - MISTAKES - CANCELLATION DECISION TO DEFENSE SUPPLY AGENCY CONCERNING PROPRIETY OF RECISSION OF SURPLUS SALES CONTRACT BECAUSE OF MISTAKE IN MISPLACING DECIMAL POINT IN BID PRICE. WHERE A BIDDER WHO, UPON RECEIPT OF AWARD OF CONTRACT FOR SURPLUS RUBBER SCRAP, ALLEGES CORRECT BID SHOULD HAVE BEEN ?00431 PER POUND RATHER THAN ?0431 PER POUND AND COMPARISON SHOWS ERRONEOUS BID IS 3-1/2 TIMES SECOND HIGH BID, 5 TIMES GREATER THAN AVERAGE RANGE OF ALL OTHER BIDS AND EXCEEDS APPRAISAL VALUE BY 860 PERCENT, THE CONTRACTING OFFICER SHOULD HAVE BEEN ON CONSTRUCTIVE NOTICE OF ERROR AND REQUESTED VERIFICATION. THEREFORE CONTRACT MAY BE CANCELLED WITHOUT LIABILITY.

TO GENERAL HEDLUND:

WE REFER TO A LETTER DATED JANUARY 18, 1968, WITH ENCLOSURES, FROM YOUR ASSISTANT GENERAL COUNSEL, FORWARDING FOR OUR DECISION THE REQUEST OF MR. H. G. BEVILL FOR RESCISSION OF SURPLUS SALES CONTRACT NO. 21-8041-060, COVERING ITEM 4 OF SALES INVITATION FOR BIDS NO. 21 8041, ISSUED BY THE ATLANTA DEFENSE SURPLUS SALES OFFICE. ITEM 4 WAS DESCRIBED IN THE SALES INVITATION AS FOLLOWS: "RUBBER, SCRAP: CONSISTING OF TRUCK, AUTOMOTIVE, AND TRACTOR TIRES. OUTSIDE. NO ALLOWANCE FOR MOISTURE CONTENT.

40,000 POUNDS"

FOUR BIDS WERE RECEIVED AND OPENED ON NOVEMBER 14, 1967, FOR ITEM 4 AS FOLLOWS: H. G. BEVILL

?0431 PER POUND TIRE TOWN ?012 PER POUND STEPHEN POOL

?00763 PER POUND C. B. MITCHELL ?0042 PER POUND

ON NOVEMBER 17, 1967, DD FORM 1427, NOTICE OF AWARD, STATEMENT AND RELEASE DOCUMENT WAS MAILED TO MR. BEVILL AS THE SUCCESSFUL PURCHASER. UPON RECEIPT OF NOTICE OF AWARD, MR. BEVILL BY TELEPHONE CONVERSATION ON NOVEMBER 27, 1967, AND BY LETTER DATED NOVEMBER 28, 1967, ADVISED THE CONTRACTING OFFICER THAT A MISTAKE IN THE PLACEMENT OF A DECIMAL POINT HAD OCCURRED IN THE COMPUTATION OF HIS BID PRICE, AND THAT THE CORRECT BID SHOULD HAVE BEEN ?00431 PER POUND RATHER THAN THE ?0431 PER POUND. ENCLOSED WITH THE LETTER WERE WORKSHEETS AND A NOTARIZED STATEMENT FROM A MR. PHIL HODES, WHICH STATED THAT HE HAD ACCOMPANIED MR. BEVILL TO MAXWELL AIR FORCE BASE TO INSPECT THE PROPERTY, AND THAT THEY HAD DISCUSSED AT LENGTH WHAT THE BID PRICE SHOULD BE AND HAD AGREED UPON A UNIT PRICE OF ?00431.

ALTHOUGH THE EVIDENCE PRESENTED MAY REASONABLY BE ACCEPTED AS ESTABLISHING A BONA FIDE ERROR AS ALLEGED, THE CONTROLLING QUESTION FOR RESOLUTION WHEN A MISTAKE IS ALLEGED AFTER AWARD IS WHETHER THE CONTRACTING OFFICER HAD NOTICE, OR SHOULD HAVE HAD NOTICE, OF THE POSSIBILITY OF ERROR PRIOR TO AWARD. INITIALLY, WE NOTE THAT THE CONTRACTING OFFICER DISCLAIMS ACTUAL KNOWLEDGE OF ANY MISTAKE IN THE BID PRIOR TO AWARD. HOWEVER, BOTH YOUR ASSISTANT COUNSEL AND THE ACTING COUNSEL, DEFENSE LOGISTICS SERVICES CENTER, RECOMMEND RESCISSION ON THE GROUND THAT THE PRICE DISPARITY BETWEEN THE ERRONEOUS HIGH BID AND THE OTHER BIDS RECEIVED, AND THE DISPARITY BETWEEN THE ERRONEOUS BID AND THE CURRENT MARKET APPRAISAL VALUE OF ITEM 4 OF ?005 PER POUND WERE SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR.

NORMALLY, A WIDE RANGE OF BID PRICES IN RESPONSE TO A SURPLUS SALE IS NOT SUFFICIENT TO PLACE A CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR BECAUSE THE PRICES OFFERED DEPEND TO A GREAT EXTENT UPON THE USES TO WHICH THE PROPERTY WILL BE PUT, OR UPON THE RISK OF RESALE WHICH THE BIDDER MAY BE WILLING TO TAKE. SEE B 151079, MARCH 28, 1963. ALSO, SEE UNITED STATES V SABIN METAL CORPORATION, 151 F.SUPP. 683; AFFIRMED, 253 F.2D 956, AND CASES CITED THEREIN. IN THE INSTANT CASE, A COMPARISON OF THE BIDS INDICATES THAT THE ERRONEOUS BID IS IN EXCESS OF 3-1/2 TIMES THE SECOND HIGH BID, AND IS OVER 5 TIMES GREATER THAN THE AVERAGE RANGE OF ALL OTHER BIDS. THIS DISPARITY IS SIGNIFICANT WHEN CONSIDERED IN LIGHT OF THE FACT THAT ITEM 4 HAS A CURRENT MARKET APPRAISAL VALUE OF ?005 PER POUND AND THE ERRONEOUS BID EXCEEDS THE APPRAISAL VALUE BY APPROXIMATELY 860 PERCENT. IN THIS RESPECT, OUR OFFICE HAS RECOGNIZED THAT WHERE, AS HERE, THE PROPERTY FOR SALE IS SCRAP OF SUCH A KIND AS TO HAVE A FAIRLY WELL ESTABLISHED AND ASCERTAINABLE MARKET VALUE, A BID SUBSTANTIALLY IN EXCESS OF SUCH MARKET VALUE SHOULD NOT BE ACCEPTED WITHOUT VERIFICATION. B-162650, NOVEMBER 16, 1967; B-137846, JANUARY 30, 1959.

WE, THEREFORE, BELIEVE THAT THE CIRCUMSTANCES OF THIS CASE ARE SUFFICIENT TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR. ACCORDINGLY, WE CONCUR IN THE RECOMMENDATION THAT THE CONTRACT WITH MR. H. G. BEVILL BE RESCINDED WITHOUT LIABILITY.