B-165090, SEPT. 10, 1968

B-165090, SEPT. 10, 1968

TO MR. DRIVER:

REFERENCE IS MADE TO A LETTER DATED AUGUST 15, 1968, WITH ENCLOSURES, FROM THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN RELATIVE TO AN ERROR ALLEGED BY THE MARKET FORGE COMPANY, EVERETT, MASSACHUSETTS, TO HAVE BEEN MADE IN ITS BID UPON WHICH PURCHASE ORDER NO. 1193 IS BASED.

THE VETERANS DOMICILIARY, WHITE CITY, OREGON, BY INVITATION FOR BIDS NO. 68-28, REQUESTED BIDS FOR FURNISHING BAKING AND ROASTING OVENS AS DESCRIBED UNDER ITEMS 1, 2 AND 3. ITEM 1 WAS DESCRIBED IN PERTINENT PART, AS FOLLOWS:

"1. OVEN, CONVECTION, BAKING AND ROASTING, ELECTRIC, TYPE II, WITH LEGS. SHALL CONFORM TO VETERANS ADMINISTRATION SPECIFICATION NO. X 714, DATED MAY 1, 1967; WITH THE FOLLOWING EXCEPTIONS:

"A. OVEN SHALL BE HIGH CAPACITY, HIGH VOLUME TYPE, ELECTRICALLY HEATED USING CIRCULATING AIR FOR CONVECTION HEATING. OVEN SHALL CONSIST OF A DOUBLE COMPARTMENT, SUPPORTED ON LEGS. TO BE AN INTEGRATED UNIT OF ONE MANUFACTURER. EXTERIOR DIMENSIONS OF OVEN COMPARTMENT SHALL BE APPROXIMATELY 45 INCHES WIDTH X 43 INCHES DEPTH BY NOT MORE THAN 76 INCHES HEIGHT.'

FIVE RESPONSIVE BIDS ON ITEM 1 WERE RECEIVED AND OPENED ON JUNE 17, 1968. THREE OF THESE BIDS, INCLUDING THAT OF THE STOVE MANUFACTURER -- MARKET FORGE COMPANY -- IN THE AMOUNT OF $1,662 AND THOSE IN THE AMOUNT OF $2,575.52 AND $2,590, WERE BASED ON FURNISHING MARKET FORGE'S MODEL 186C OVEN. THE TWO REMAINING BIDS OF $1,880 AND $2,025 WERE BASED ON FURNISHING VULCAN-HART CORPORATION'S MODEL V0-33 OVEN. ON JUNE 28, 1968, THE LOW BID OF MARKET FORGE COMPANY AS TO ITEM 1 WAS ACCEPTED AND ON THE SAME DAY PURCHASE ORDER NO. 1193 WAS ISSUED FOR DELIVERY OF THE OVEN.

IT IS REPORTED THAT ON JULY 2, 1968, A REPRESENTATIVE OF THE MARKET FORGE COMPANY TELEPHONED THE CONTRACTING OFFICER ALLEGING THAT AN ERROR HAD BEEN MADE IN QUOTING ITS PRICE FOR ITEM 1. BY LETTER DATED JULY 9, 1968, THE COMPANY ADVISED THAT IT HAD INADVERTENTLY QUOTED A PRICE FOR AN OVEN WITH A SINGLE COMPARTMENT RATHER THAN AN OVEN WITH A DOUBLE COMPARTMENT AS REQUIRED BY THE INVITATION. IN SUPPORT OF ITS ALLEGATION OF ERROR, THE COMPANY SUBMITTED ITS CURRENT PRICE LIST WHICH SHOWS THE UNIT PRICE OF A MODEL 186C SINGLE COMPARTMENT CONVECTION OVEN AS $1,570, TO WHICH AMOUNT $92 WAS ADDED FOR FREIGHT TO ARRIVE AT ITS TOTAL BID PRICE OF $1,662. THE COMPANY STATED THAT THE PRICE OF THE DOUBLE STACK (COMPARTMENT) SHOULD HAVE BEEN TWICE THE PRICE QUOTED BY IT AND REQUESTED THAT THE PURCHASE ORDER BE CANCELED WITHOUT LIABILITY TO IT.

UNDER ITEM 1 OF THE INVITATION, BIDDERS WERE REQUESTED TO QUOTE A PRICE FOR A TWO COMPARTMENT (DOUBLE STACK) ELECTRIC BAKING AND ROASTING CONVECTION OVEN. THE RECORD SHOWS THAT OF THE FIVE BIDDERS, THREE OFFERED TO FURNISH MARKET FORGE'S MODEL 186C OVEN. THE ABSTRACT OF BIDS SHOWS THAT THE MANUFACTURER, MARKET FORGE COMPANY, SPECIFIED A PRICE OF $1,662 FOR THE DOUBLE COMPARTMENT (STACK) OVEN AND THAT THE TWO DISTRIBUTORS, GREENE-TODD CO., INC., AND DOHRMANN COMPANY, SPECIFIED UNIT PRICES OF $2,575.52 AND $2,590, RESPECTIVELY, FOR THE SAME OVEN. THUS, THE BID OF THE MANUFACTURER IS APPROXIMATELY 54 AND 56 PERCENT LOWER THAN THE BIDS RECEIVED FROM ITS DISTRIBUTORS. IN HIS REPORT, THE CONTRACTING OFFICER STATES THAT THE GOVERNMENT'S ESTIMATE FOR THE OVEN COVERED BY ITEM 1 WAS $1,500; THAT SUCH ESTIMATE WAS ARRIVED AT AFTER REFERRING TO VARIOUS COMMERCIAL CATALOGS AND DISCUSSIONS WITH SALESMEN; AND THAT THE TOTAL ESTIMATE FOR THE THREE OVENS BEING PURCHASED UNDER ITEMS 1, 2 AND 3 WAS INCREASED BY $1,000 FOLLOWING DISCUSSIONS WITH A SALESMAN BEFORE BIDS WERE OPENED.

THE CONTRACTING OFFICER FURTHER ADVISES THAT HE NOTED THE VARIANCE IN THE PRICES QUOTED BY THE MANUFACTURER AND HIS DISTRIBUTORS, BUT ASSUMED THAT THE LOW BID WAS NOT THE RESULT OF AN ERROR INASMUCH AS MARKET FORGE WAS THE MANUFACTURER AND IN A BETTER POSITION TO OFFER A LARGER DISCOUNT FROM THE LIST PRICE THAN ITS DISTRIBUTORS. WHILE IT IS TRUE THAT A MANUFACTURER IS IN A BETTER POSITION TO OFFER A LARGER DISCOUNT THAN ITS DISTRIBUTORS, A DIFFERENCE OF APPROXIMATELY 54 PERCENT APPEARS TO BE SO LARGE AS TO SUGGEST A REASONABLE DOUBT AS TO THE CORRECTNESS OF THE MANUFACTURER'S PRICE. THE RECORD INDICATES THAT PRIOR TO AWARD, THE CONTRACTING OFFICER QUESTIONED THE DOHRMANN COMPANY, A DISTRIBUTOR OF MARKET FORGE EQUIPMENT, ABOUT ITS BID AND THAT IN A LETTER DATED JUNE 24, 1968, DOHRMANN POINTED OUT TO THE CONTRACTING OFFICER THAT THE ILLUSTRATED BROCHURE OF MARKET FORGE COMPANY ON THE MODEL 186C OVEN SHOWS THAT MODEL TO BE ONLY A SINGLE STACK (COMPARTMENT) OVEN RATHER THAN A DOUBLE STACK OVEN. IN THE CIRCUMSTANCES, THE BID OF THE MARKET FORGE COMPANY SHOULD NOT HAVE BEEN ACCEPTED WITHOUT VERIFICATION OF ITS BID PRICE.

ACCORDINGLY, PURCHASE ORDER NO. 1193 MAY BE CANCELED WITHOUT LIABILITY TO THE MARKET FORGE COMPANY.

THE DOCUMENTS SUBMITTED WITH THE DIRECTOR'S LETTER OF AUGUST 15, 1968, ARE RETURNED AS REQUESTED.