B-164865, JUL. 31, 1968

B-164865, JUL. 31, 1968

TO MR. DRIVER:

REFERENCE IS MADE TO THE LETTER OF JULY 16, 1968, WITH ENCLOSURES, FROM THE DIRECTOR, SUPPLY SERVICE, VETERANS ADMINISTRATION, FORWARDING FOR OUR DECISION THE REQUEST OF LESTER LAWRENCE AND SON, INC., AND HOLLEB AND COMPANY FOR RELEASE FROM CONTRACTS RECENTLY AWARDED TO SAID FIRMS, BASED ON MISTAKES IN THEIR BID PRICES WHICH WERE ALLEGED AFTER AWARD.

THE SUBJECT INVITATION, SOLICITATION NO. M4-315-68, ISSUED ON MAY 13, 1968, BY THE VETERANS ADMINISTRATION MARKETING CENTER, HINES, ILLINOIS, SOUGHT THE MANUFACTURE AND DELIVERY OF MAYONNAISE AND SALAD DRESSING, F.O.B. ORIGIN OR DESTINATION BASIS, FOR SIX ITEMS OF DIFFERING QUANTITIES TO THREE VETERANS ADMINISTRATION DEPOTS.

FOUR BIDS WERE RECEIVED AND OPENED ON MAY 27, 1968. THE F.O.B. DESTINATION PRICES QUOTED BY THE FOUR BIDDERS, AFTER SUBTRACTING THE PROMPT PAYMENT DISCOUNTS WHERE APPLICABLE, FOR MAYONNAISE (ITEMS 1-3) AND SALAD DRESSING (ITEMS 4-6), WERE AS FOLLOWS:

QTY LESTER

IN

CASES

OF 4 DESTINATION DREW KRAFT LAWRENCE HOLLEB

- 1 FOODS

GAL. ITEM JARS CORP. FOODS AND SON AND

INC. CO. ---- ----- ------------ ------- --- -- ------------ ----------- 1 1,738 SOMERVILLE,

N. J. --- 6.82 6.63665 --- 2 409 BELL, CALIF. --- --- 7.91025 --- 3 1,075 HINES, ILL. *7.4844 --- 6.35805 6.19 4 971 SOMERVILLE,

N. J. --- 5.70 5.66155 --- 5 185 BELL, CALIF. --- --- 6.9451 --- 6 1,286 HINES, ILL. *5.4648 --- 5.22375 5.13

*THE PRICES BID BY DREW FOODS CORPORATION WERE FOB POINT OF ORIGIN, ST. LOUIS, MISSOURI.

ON JUNE 4, 1968, AWARDS WERE MADE TO THE TWO LOW OFFERORS, HOLLEB AND COMPANY AND LESTER LAWRENCE AND SON, INC., FOR THE HINES, ILLINOIS, AND SOMERVILLE, NEW JERSEY DEPOTS, RESPECTIVELY. AWARDS WERE NOT MADE FOR THE DEPOT AT BELL, CALIFORNIA, BECAUSE THE CONTRACTING OFFICER CONCLUDED THAT THE COST OF TRANSPORTATION INCLUDED IN THE DELIVERED PRICE MADE THE COST EXCESSIVE. THIS OPINION WAS BASED ON ESTIMATED COSTS FOR MAYONNAISE OF $6.68 PER CASE AND SALAD DRESSING OF $5.40 PER CASE, WHICH WERE THE RESULTS OF GOVERNMENT STUDIES CONDUCTED PRIOR TO STANDARDIZATION FOR THESE PRODUCTS USING COTTONSEED OR CORN OIL AS THE BASIS FOR SAID COST STUDY.

IN THE LETTER OF JULY 16, 1968, FROM THE DIRECTOR, SUPPLY SERVICE OF YOUR AGENCY, THE FACTS SURROUNDING THE ALLEGED ERRORS IN PRICING ARE BRIEFLY SUMMARIZED AS FOLLOWS:

"THE MISTAKES IN BIDS FIRST CAME TO THE ATTENTION OF THE CONTRACTING OFFICER ON JUNE 10, WHEN HOFFMAN HOUSE FOODS PRODUCTS, INC., THE MANUFACTURER OF THE PRODUCTS WHICH WERE SCHEDULED TO BE DELIVERED BY BOTH CONTRACTORS, INFORMED THE CONTRACTING OFFICER THAT ITS OFFERS TO A BROKER HAD BEEN BASED ON SOYBEAN OIL INSTEAD OF CORN OR COTTONSEED OIL. LETTERS FROM THE MANUFACTURER, THE BROKER AND BOTH CONTRACTORS ARE IN COMPLETE AGREEMENT AS TO HOW THE ERRORS OCCURRED. RELIEF HAS BEEN REQUESTED BY THE TWO CONTRACTORS SINCE THE MANUFACTURER HAS ALLEGED THAT PRODUCTION COSTS WOULD BE PROHIBITIVE AS THEY ARE NOT EQUIPPED TO HANDLE EITHER PRODUCT WITH EITHER CORN OR COTTONSEED OIL.'

THE SUBJECT INVITATION'S SPECIFICATIONS CONCERNING THE REQUIRED METHOD OF MANUFACTURING BOTH MAYONNAISE AND SALAD DRESSING STATED:

"SHALL BE COTTONSEED OR CORN OIL OR BOTH IN ACCORDANCE WITH FEDERAL SPECIFICATION EE-M-131D DATED 3/27/67 AND INTERIM AMENDMENT 1 DATED 11/8/67 EXCEPT PARAGRAPH 4.2.5.3.3 WHICH IS AMENDED.'

WHILE IT APPEARS FROM THE RECORD BEFORE US THAT THE ERROR MAY HAVE BEEN MADE AS ALLEGED, THE PRIMARY QUESTION FOR CONSIDERATION IS NOT WHETHER AN ERROR WAS MADE IN THE PRICE QUOTATIONS OF THE CONTRACTORS, BUT WHETHER VALID AND BINDING CONTRACTS WERE CONSUMMATED BY THEIR ACCEPTANCE BY THE GOVERNMENT.

IN CASES WHERE A MISTAKE HAS BEEN ALLEGED AFTER AWARD OF THE CONTRACT, THIS OFFICE WILL GRANT RELIEF ONLY IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. THIS IS A WELL-ESTABLISHED PRINCIPLE OF THE LAW OF CONTRACTS, AND IS EQUALLY APPLICABLE TO PRIVATE AND PUBLIC CONTRACTS. COMP. GEN. 509; B-156542, JUNE 1, 1965; B-141294, DECEMBER 8, 1959.

THERE WAS NOTHING ON THE FACE OF THE BIDS OF THE CONTRACTORS TO INDICATE AN ERROR THEREIN, AND NO ALLEGATION OF ERROR WAS MADE UNTIL A WEEK AFTER AWARD OF THE CONTRACT. IT IS ALSO CLEAR THAT THE BID PRICES OF THE OTHER TWO BIDDERS WERE NOT SO DIFFERENT IN AMOUNT AS TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THE QUOTATIONS OF THE CONTRACTORS. INDEED, IN MOST INSTANCES THE BID PRICES, APPARENTLY BASED UPON THE USE OF SOYBEAN OIL, WHICH WE UNDERSTAND IS CHEAPER THAN CORN OIL OR COTTONSEED OIL, WERE GREATER THAN THE GOVERNMENT'S ESTIMATE FOR SAID ITEMS USING CORN OIL OR COTTON SEED OIL AS ITS BASIS FOR THE ESTIMATED COST. MOREOVER, THE INVITATION ISSUED IN THE PRESENT PROCUREMENT WAS CLEAR AND UNAMBIGUOUS AS TO THE NEEDS OF THE GOVERNMENT. THE RESPONSIBILITY FOR THE PREPARATION OF THE OFFER SUBMITTED IN RESPONSE TO THE INVITATION WAS UPON THE CONTRACTOR. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V UNITED STATES, 100 CT. CL. 120, 163. IF THE CONTRACTORS SUBMITTED OFFERS BASED UPON ERRONEOUS QUOTATIONS FROM THEIR BROKER WHO HAD BASED ITS QUOTATION ON THE SAME ERROR INITIALLY COMMITTED BY THE MANUFACTURER, THAT IS ORDINARILY A MATTER FOR ADJUSTMENT BETWEEN THE CONTRACTORS OR BROKER AND MANUFACTURER.

IN VIEW OF THE FOREGOING, IT IS OUR OPINION THAT ANY ERRORS MADE IN THE QUOTATIONS OF THE CONTRACTORS WERE UNILATERAL, NOT MUTUAL, AND THAT ACCEPTANCE OF THE OFFERS BY THE GOVERNMENT WITHOUT NOTICE THEREOF CONSUMMATED VALID AND BINDING CONTRACTS WHICH FIXED THE RIGHTS OF THE PARTIES THERETO. SEE OGDEN AND DOUGHERTY V UNITED STATES, 102 CT. CL. 249; SALIGMAN, ET AL. V UNITED STATES, 56 F.SUPP. 505. SEE ALSO 36 COMP. GEN. 27 AND 40 ID. 326.

FOR THE REASONS STATED, WE CONCLUDE THERE IS NO BASIS FOR ANY RELIEF TO THE CONTRACTORS OR FOR PAYMENT OF ANY AMOUNTS IN EXCESS OF THE CONTRACT PRICES.

AS REQUESTED, THE FILE SUBMITTED WITH THE DIRECTOR'S LETTER IS RETURNED.