B-163731, SEP. 30, 1968

B-163731, SEP. 30, 1968

TO MR. SECRETARY

REFERENCE IS MADE TO LETTER SUP 0232A OF APRIL 3, 1968, FORWARDING A REPORT ON THE CLAIM OF THE WARD LAFRANCE TRUCK CORPORATION FOR $132,079 BECAUSE OF AN ERROR MADE IN THE BID UPON WHICH CONTRACT N00600-67-C-0167 IS BASED.

BY INVITATION FOR BIDS 600-566-66, THE NAVY PURCHASING OFFICE SOLICITED BIDS F.O.B. ORIGIN AND DESTINATION FOR FURNISHING 100 TYPE TA-18 AIRCRAFT TOWING TRACTORS TO VARIOUS DESTINATIONS. BIDS WERE OPENED MARCH 21, 1966. THE WARD LAFRANCE TRUCK CORPORATION AND THE FRANK G. HOUGH COMPANY, A SUBSIDIARY OF THE INTERNATIONAL HARVESTER COMPANY, WERE THE ONLY BIDDERS. WARD LAFRANCE BID ONLY ON AN F.O.B. ORIGIN BASIS IN THE AMOUNT OF $10,837 A UNIT. THE HOUGH COMPANY BID $12,725 A UNIT F.O.B. ORIGIN AND FROM $12,939 TO $13,652 A UNIT F.O.B. DESTINATION. THE WARD LAFRANCE BID WAS COMPARED TO THE HOUGH BID AND TO PREVIOUS PRICES RECEIVED FROM HOUGH AND IT WAS CONSIDERED REASONABLE.

CERTAIN SPECIFICATION DATA FURNISHED BY WARD LAFRANCE WITH ITS BID PRESENTED A PROBLEM WHICH WAS NOT RESOLVED BY NAVY PERSONNEL UNTIL AUGUST 1966. THEREAFTER, A PREAWARD SURVEY WAS CONDUCTED AND AN AWARD OF CONTRACT N00600-67-C-0167 WAS SUBSEQUENTLY MADE TO WARD LAFRANCE EFFECTIVE AUGUST 30, 1966.

BY LETTER OF JUNE 1, 1967, OR 9 MONTHS AFTER AWARD OF THE CONTRACT AND MORE THAN 14 MONTHS AFTER THE OPENING OF BIDS, WARD LAFRANCE NOTIFIED THE CONTRACTING OFFICER THAT IT HAD DISCOVERED THAT IT HAD MADE AN ERROR IN THE PREPARATION OF ITS BID. WARD LAFRANCE ADVISED THAT IT HAD OMITTED THE COST OF ONE AXLE FROM ITS UNIT PRICE AND CLAIMED ADDITIONAL COMPENSATION FOR THE COST OF THE OMITTED AXLE. THE CONTRACTING OFFICER DENIED THE CLAIM ON THE BASIS THAT THERE WAS NO EVIDENCE WHICH SHOWS THAT HE EITHER WAS, OR SHOULD HAVE BEEN, IN NOTICE OF AN ERROR IN THE BID. MOREOVER, IN REPORTING TO OUR OFFICE, THE CONTRACTING OFFICER HAS STATED THAT HE IS NOT CONVINCED THAT WARD LAFRANCE MADE AN ERROR WHEN SUBMITTING THE BID. SUGGESTS THAT THE WARD LAFRANCE ESTIMATOR DID NOT HAVE A QUOTATION ON THE AXLES AT THE TIME OF BID PREPARATION AND HAD MERELY MADE A POOR ESTIMATE OF THE COST OF THE AXLES.

THE WARD LAFRANCE BID IN THE AMOUNT OF $10,837 A UNIT WAS $1,888 A UNIT LESS THAN THE BID IN THE AMOUNT OF $12,725 A UNIT SUBMITTED BY HOUGH WHO HAD BEEN THE PREVIOUS SOURCE FOR THESE TRACTORS. HOUGH'S PRICE PER UNIT IN THE THREE PROCUREMENTS PRECEDING THE INSTANT ONE HAD BEEN $12,830, $12,547 AND $12,133. FURTHER, THE GOVERNMENT HAD ESTIMATED THE COST OF THE PROCUREMENT AS $13,500, WHICH FIGURE, WE UNDERSTAND, INCLUDED THE COST OF TRANSPORTATION OF ABOUT $594 A UNIT. THUS, THE GOVERNMENT ESTIMATE WOULD HAVE BEEN ABOUT $12,906 A UNIT F.O.B. ORIGIN OR RELATIVELY CLOSE TO THE HOUGH BID AND THE PRICE OF THE PREVIOUS PROCUREMENTS. ADDITIONALLY, THE CONTRACT IS LARGELY AN ASSEMBLY CONTRACT AND WARD LAFRANCE CONTENDS, AND IT IS NOT DENIED BY THE CONTRACTING OFFICER, THAT THE COST OF THE PURCHASED PARTS PER UNIT ALONE, WITHOUT ASSEMBLY COSTS AND PROFITS, WAS ABOUT $9,000 TO $10,000. SINCE WARD LAFRANCE HAD NEVER MANUFACTURED THE TRACTORS BEFORE, IT COULD BE EXPECTED THAT IT WOULD HAVE ADDITIONAL EXPENSES AS A NEW PRODUCER THAT HOUGH WOULD NOT HAVE AS A PREVIOUS PRODUCER. THUS, FROM THE CIRCUMSTANCES, IT SHOULD HAVE BEEN REASONABLY APPARENT TO THE CONTRACTING OFFICER THAT WARD LAFRANCE'S PERFORMANCE OF THE CONTRACT WELL MIGHT RESULT IN A POSSIBLE FINANCIAL LOSS. TO CONSIDER THAT WARD LAFRANCE HAD INTENDED SUCH A RESULT IS UNREASONABLE SINCE IT HAD BEEN ASCERTAINED BEFORE AWARD THAT IT HAD BEEN OPERATING AT A DEFICIT FOR SEVERAL YEARS AND IT WAS REQUIRED TO FURNISH A GUARANTEE OF FINANCIAL SUPPORT BEFORE AN AWARD WOULD BE MADE.

ALL OF THESE FACTORS TAKEN TOGETHER SHOULD HAVE ALERTED THE CONTRACTING OFFICER TO THE POSSIBILITY OF AN ERROR IN THE BID AND VERIFICATION OF THE BID PRICE SHOULD HAVE BEEN SOUGHT FROM WARD LAFRANCE BEFORE AWARD.

RESPECTING THE SUGGESTION THAT WARD LAFRANCE'S ESTIMATOR MERELY ESTIMATED THE COST OF THE AXLES WITHOUT HAVING OBTAINED A QUOTATION FROM THE AXLE SUPPLIER, WARD LAFRANCE HAS SUBMITTED AN AFFIDAVIT FROM THE PRESIDENT OF THE COMPANY REGARDING A TELEPHONE CONVERSATION HE HAD ON APRIL 25, 1968, WITH THE ESTIMATOR WHO IS NO LONGER EMPLOYED BY THE COMPANY WHEREIN SUCH FORMER EMPLOYEE CATEGORICALLY DENIED THAT THE COST OF THE AXLES WAS BASED ON HIS OWN JUDGMENT AND STATED THAT IT WAS BASED ON AN ORAL QUOTATION RECEIVED FROM THE SUPPLIER OVER THE TELEPHONE AND THAT THE ERROR HAD OCCURRED WHEN HE ENTERED THE PRICE FOR ONE AXLE RATHER THAN FOR TWO AXLES. THE ATTORNEY FOR WARD LAFRANCE WHO WAS PRESENT IN THE PRESIDENT'S OFFICE DURING THE TELEPHONE CONVERSATION HAS CORROBORATED THE FOREGOING BY AFFIDAVIT.

IN THE CIRCUMSTANCES, WE BELIEVE THAT THE RECORD BEFORE US REASONABLY ESTABLISHES THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN ON NOTICE OF THE POSSIBILITY OF ERROR. THEREFORE, AND SINCE WE ARE SATISFIED THAT THE ERROR DID IN FACT OCCUR, THE CONTRACT PRICE FOR EACH UNIT SHOULD BE INCREASED BY $1,320.79 PER UNIT BY APPROPRIATE MODIFICATION TO THE CONTRACT.