B-167627, SEPTEMBER 22, 1969 49 COMP. GEN. 199

B-167627, SEPTEMBER 22, 1969 49 COMP. GEN. 199

CONTRACTS -- MISTAKES -- UNIT PRICE -- ALL-OR-NONE BIDS A MISTAKE ALLEGED AFTER AWARD IN THE BID PRICE OF AN ITEM IN AN ALL OR- NONE BID ON SCRAP WHICH HAD BEEN PRORATED TO DETERMINE THE HIGH BIDDER ON EACH ITEM IS NOT FOR SOLUTION UNDER THE UNILATERAL MISTAKE RULE HOLDING THE BIDDER BOUND UNLESS THE MISTAKE IS OBVIOUS. ALTHOUGH SUBSTANTIAL DIFFERENCES IN BID PRICES ON SURPLUS PROPERTY ARE NOT SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF A MISTAKE AS WOULD SIMILAR DIFFERENCES IN BID PRICES ON NEW EQUIPMENT, THE CONTRACTING OFFICER WAS OBLIGED TO CONSIDER THE PRORATED PRICES AS IF THE BIDDER HAD INSERTED THEM IN HIS BID, AND THE CONTRACTING OFFICER FAILING TO VERIFY A PRORATED UNIT PRICE THAT WAS 32 PERCENT HIGHER THAN THE SECOND HIGH BID AND 57 PERCENT HIGHER THAN THE CURRENT MARKET APPRAISAL, THE AWARD ON THE ERRONEOUSLY PRICES ITEM MAY BE RESCINDED WITHOUT LIABILITY TO THE BIDDER.

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY SEPTEMBER 22, 1969:

REFERENCE IS MADE TO A LETTER (YOUR REFERENCE DSAH-G) DATED AUGUST 15, 1969, WITH ENCLOSURES, FROM YOUR ASSISTANT COUNSEL, SUBMITTING A REPORT CONCERNING THE REQUEST OF THE SOUTHERN LEAD COMPANY (SOUTHERN) FOR RESCISSION OF ITEMS 46 AND 56 AWARDED TO IT UNDER SALES CONTRACT NO. 11- 9100-15 BECAUSE OF A MISTAKE IN BID ALLEGED AFTER AWARD OF THE CONTRACT.

IFB 11-9100 OFFERED FOR SALE 71 ITEMS OF SURPLUS GOVERNMENT PROPERTY. SOUTHERN'S REQUEST FOR RESCISSION CONCERNS ITEMS 46, 56 AND 59, WHICH WERE DESCRIBED IN THE INVITATION AS FOLLOWS:

46. LEAD BATTERIES SCRAP: INCLUDING TRUCK, BUS, TRACTOR AND OTHER TYPES. WITH HARD RUBBER AND PLASTIC CASES. DRAINED AND VENTED. OUTSIDE- -NO ALLOWANCE FOR WATER, MOISTURE OR ACID IN THE TOTAL WEIGHT 30,000 POUND

56. ELECTRONIC SCRAP: CONSISTING OF CANNIBALIZED COMPUTER AND ELECTRONIC EQUIPMENT. INSIDE 20,000 POUND

59. LEAD BATTERIES. SCRAP: AIRCRAFT, FORKLIFT AND VEHICLE, WITH HARD RUBBER, STEEL AND ALUMINUM CASES. DRAINED. OUTSIDE--NO ALLOWANCE FOR MOISTURE, WATER OR ACID CONTENT 50,000 POUND ARTICLE EQ, DANGEROUS PROPERTY IS APPLICABLE.

THE FOLLOWING BIDS WERE RECORDED AT THE BID OPENING ON MARCH 25, 1969:

UNIT PRICE EXTENDED

BIDDER (PER POUND) PRICE ITEM 46 L. SANDEROW

$.04761 $1428.30 GREENVILLE PARTS AND METAL CO.,

INC. $.0403 $1209.00 NICHOLAS J. GOETTER, JR.

.01 300.00 THE CURRENT MARKET APPRAISAL FOR ITEM 46 WAS $.04 PER POUND. ITEM 56 MICHAEL VITAL $.011 $220.00 THE CURRENT MARKET APPRAISAL FOR ITEM 56 WAS $.015 PER POUND. ITEM 59 L. SANDEROW $.04211 $2105.50 DAVIS IRON & METAL .0411 2055.00 LOWE & MONIODIS, INC. .0381 1905.00 GREENVILLE PARTS & METAL CO.,

INC. .0378 1890.00 NORART CORP.

.0251 1255.00 NICHOLAS J. GOETTER, JR. .01

500.00

THE CURRENT MARKET APPRAISAL FOR ITEM 59 WAS $.035 PER POUND.

PAGE 8 OF THE IFB INCORPORATED BY REFERENCE PORTIONS OF DEFENSE LOGISTICS SERVICES CENTER PAMPHLET "SALES BY REFERENCE--INSTRUCTIONS, TERMS AND CONDITIONS APPLICABLE TO DEPARTMENT OF DEFENSE SURPLUS PERSONAL PROPERTY" (APRIL 1968). ARTICLE AD OF THE PAMPHLET PERMITS THE SUBMISSION OF "ALL- OR-NONE" BIDS AND PROVIDES IN PERTINENT PART:

IF IT BECOMES NECESSARY FOR THE PURPOSE OF CONTRACT ADMINISTRATION TO ARRIVE AT LINE ITEM PRICES, SUCH PRICES WILL BE DETERMINED BY PRORATING THE "ALL-OR-NONE" BID AMONG THE ITEMS INVOLVED BASED ON THE HIGH RESPONSIVE INDIVIDUAL BIBS SUBMITTED FOR THOSE ITEMS INCLUDING ANY SUCH BID SUBMITTED BY THE PURCHASER. ***

SOUTHERN SUBMITTED THE FOLLOWING BID:

.46

.56

ITEMS 46 AND 56 ARE TO BE BASED ON "ALL OR NONE" PRICE OF $2,180.00

IN ACCORDANCE WITH ARTICLE AD OF THE SALE BY REFERENCE PAMPHLET, QUOTED ABOVE, SOUTHERN'S "ALL-OR-NONE BID" WAS PRORATED. THE PRORATED UNIT PRICE FOR ITEM 46 WAS $.062968 PER POUND FOR AN EXTENDED PRICE OF $1,889.04; AND THE PRORATED PRICE FOR ITEM 56 WAS DETERMINED TO BE $.014548 WITH AN EXTENDED PRICE OF $290.96. THUS, AS PRORATED UNDER THE CONTRACT, SOUTHERN'S BID ON ITEM 46 WAS $.062968 PER POUND, WHERE OTHER BIDS RANGED FROM $.01 TO $.0476 AND THE CURRENT MARKET APPRAISAL WAS $.04. ON ITEM 56, SOUTHERN'S PRORATED BID WAS $.014548 PER POUND, THE ONLY OTHER BID WAS $.011, AND THE CURRENT MARKET APPRAISAL WAS $.015 PER POUND.

ON MARCH 28, 1969, AWARDS FOR ITEMS 46 AND 56 WERE MADE TO SOUTHERN AND, UPON RECEIPT OF NOTICES OF AWARD, SOUTHERN ALLEGED ERROR IN THAT IT HAD INTENDED TO BID ON ITEMS 46 AND 59, BUT NOT ON ITEM 56. SOUTHERN SUBMITTED WORKSHEETS IN SUPPORT OF ITS ALLEGATION THAT ITS INTENDED BID WAS $.044 PER POUND ON ITEM 46 AND $.043 PER POUND ON ITEM 59. BY LETTERS DATED JULY 11 AND 29, 1969, THE DEFENSE SUPPLY AGENCY DENIED THE CLAIM OF MISTAKE, FROM WHICH SOUTHERN HAS APPEALED TO THIS OFFICE.

AS A GENERAL RULE, IF A BIDDER MAKES A UNILATERAL MISTAKE, HE IS BOUND BY THE CONTRACT AWARDED UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE MISTAKE AT THE TIME OF AWARD. SALIGMAN V UNITED STATES, 56 F. SUPP. 505. IF THE CONTRACTING OFFICER WAS ACTUALLY OR CONSTRUCTIVELY AWARE OF THE MISTAKE, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. KEMP V UNITED STATES, 38 F. SUPP. 568; WENDER PRESSES, INC. V UNITED STATES, 170 CT. CL. 483, 343 F. 2D 961. IN DETERMINING WHETHER THE CONTRACTING OFFICER SHOULD HAVE KNOWN OF ERROR, OR HAD "CONSTRUCTIVE" NOTICE THEREOF IN SURPLUS SALES CASES, THIS OFFICE HAS CONSIDERED A NUMBER OF FACTORS, AMONG WHICH ARE: (1) THE RELATIONSHIP OF THE AMOUNT OF THE ALLEGEDLY ERRONEOUS HIGH BID AND THE SECOND HIGHEST BID; (2) COMPARISON OF THE HIGH BID AND THE CURRENT MARKET APPRAISAL OF THE PROPERTY; AND (3) THE NATURE OF THE PROPERTY BEING SOLD. GENERALLY, IN SALES OF SURPLUS PROPERTY THE EXISTENCE OF A SUBSTANTIAL DISCREPANCY BETWEEN THE ERRONEOUS BID AND THE SECOND HIGH BID OR THE CURRENT MARKET APPRAISAL WOULD NOT NECESSARILY BE SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON NOTICE OF MISTAKE, AS WOULD SIMILAR DIFFERENCES IN THE PRICES BID ON NEW EQUIPMENT. UNITED STATES V SABIN METAL CORP., 151 F. SUPP. 683, AFFIRMED 253 F. 2D 956. HOWEVER, THIS OFFICE HAS RECOGNIZED THAT WIDE PRICE VARIATIONS NORMALLY ARE NOT ENCOUNTERED IN THE SALE OF SCRAP METALS BECAUSE OF THE ESTABLISHED MARKET FOR THIS MATERIAL AND THE LIMITED USES TO WHICH IT MAY BE PUT. B-160704, FEBRUARY 16, 1967; B-158334, JANUARY 21, 1966; B- 149660, SEPTEMBER 21, 1962.

IN THE INSTANT CASE THE TERMS OF THE INVITATION REQUIRED THE CONTRACTING OFFICER TO MAKE A PRORATION OF SOUTHERN'S "ALL-OR-NONE" BID. UNDER SUCH CIRCUMSTANCES IT IS OUR OPINION THAT THE CONTRACTING OFFICER IS REQUIRED TO CONSIDER SUCH PRORATED UNIT PRICES IN THE SAME MANNER AS IF THE BIDDER HAD ACTUALLY INSERTED THEM IN HIS BID. SOUTHERN'S PRORATED UNIT PRICE OF $.062968 PER POUND ON ITEM 46, AS DETERMINED BY THE CONTRACTING OFFICER, WAS 32 PERCENT HIGHER THAN THE SECOND HIGH BID AND 57 PERCENT HIGHER THAN THE CURRENT MARKET APPRAISAL OF THE ITEM. IN OTHER SALES OF SCRAP METAL OUR OFFICE HAS FOUND THAT SIMILAR DISPARITIES BETWEEN THE ERRONEOUS BID AND THE SECOND HIGH BID AND BETWEEN THE ERRONEOUS BID AND THE CURRENT MARKET APPRAISAL HAVE PLACED THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR. B-160704, FEBRUARY 16, 1967; B- 160520, DECEMBER 23, 1966.

ACCORDINGLY, WE MUST CONCLUDE THAT A BONA FIDE MISTAKE WAS MADE AS ALLEGED, THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN AWARE OF THE POSSIBILITY OF ERROR, AND THAT VERIFICATION OF THE BID SHOULD HAVE BEEN REQUESTED BEFORE ACCEPTANCE. THE AWARDS FOR ITEMS 46 AND 56 SHOULD THEREFORE BE RESCINDED WITHOUT LIABILITY TO SOUTHERN LEAD COMPANY.

THE FILE TRANSMITTED WITH THE ASSISTANT COUNSEL'S LETTER IS RETURNED.