B-168911, JUL. 14, 1970

B-168911, JUL. 14, 1970

CONTRACTS -- MISTAKES -- VERIFICATION DECISION TO ADMINISTRATOR, GENERAL SERVICES ADMIN. HOLDING THAT LOW OFFEROR JENKIN CONTRACTING COMPANY, INC. SHOULD NOT BE DENIED RELIEF ON BASIS OF MISTAKE BY SUBCONTRACTOR. LOW OFFEROR WHO, WHEN REQUESTED TO VERIFY PROPOSAL THAT WAS SUBSTANTIALLY LOWER THAN OTHER OFFERS, WAS TOLD THAT HIS PROPOSAL WAS IN LINE WITH GOVERNMENT ESTIMATE WAS MISLEAD BY SUCH STATEMENT AND, THEREFORE, SUBSEQUENT ALLEGATION OF MISTAKE BECAUSE SUBCONTRACTOR MADE ERROR OF $39,000 IN ESTIMATE WHICH MISTAKE IS SUBSTANTIATED AFFORDS CONTRACTOR BASIS FOR PRICE ADJUSTMENT.

TO MR. KUNZIG:

REFERENCE IS MADE TO A LETTER, WITH ENCLOSURES, DATED APRIL 2, 1970, SIGNED BY YOUR GENERAL COUNSEL, FURNISHING A REPORT WITH RESPECT TO THE ALLEGATION OF A MISTAKE BY THE JENKIN CONTRACTING COMPANY, INCORPORATED, IN SUBMITTING ITS OFFER IN RESPONSE TO THE REQUEST FOR PROPOSALS ON CONTRACT NO. GS-02B-14377 (NEG) FOR EXPANSION OF COMPUTER ROOM, MISCELLANEOUS WORK, GODDARD INSTITUTE OF SPACE STUDIES, NEW YORK, NEW YORK.

THE SOLICITATION WAS ISSUED ON OCTOBER 9, 1967, WITH A SCHEDULED OPENING DATE OF OCTOBER 18, 1967. THE SPECIFICATION REQUESTED THREE SEPARATE BIDS FOR DIFFERENT AMOUNTS OF WORK AS SET FORTH IN THE SPECIAL CONDITIONS OF THE SOLICITATION. IT IS REPORTED THAT NINE CONTRACTORS WERE INVITED TO SUBMIT PROPOSALS. IN RESPONSE TO THE SOLICITATION, THREE PROPOSALS WERE RECEIVED AS FOLLOWS:

BID NO. 1 BID NO. 2 BID NO. 3

JENKIN CONTRACTING CO., INC. $126,705 NO BID NO BID

H. SAND & CO., INC. 215,200 $203,700 $196,200

MARTIN MECHANICAL CORP. 228,500 220,500 212,500 THE GOVERNMENT'S ESTIMATE ON THE PROJECT WAS $134,690 FOR THE WORK COVERED BY BID NO. 1.

IT IS REPORTED THAT BECAUSE OF THE DISPARITY BETWEEN THE GOVERNMENT ESTIMATE AND THE SECOND AND THIRD OFFERS, THE GOVERNMENT ESTIMATE WAS REVIEWED. THE REVIEW RESULTED IN A FINDING THAT THE GOVERNMENT ESTIMATE WAS REASONABLE. WE ARE INFORMED THAT JENKIN'S LOW OFFER OF $126,705 WAS THEREFORE CONSIDERED TO BE REALISTIC AND IN LINE WITH THE GOVERNMENT ESTIMATE. HOWEVER, IN VIEW OF THE CONSIDERABLE DIFFERENCE BETWEEN JENKIN'S PROPOSAL AND THE OTHER PROPOSALS, IT IS REPORTED THAT THE CONTRACTING OFFICER'S REPRESENTATIVE TELEPHONED MR. DOMINICK IACOVONE, PRESIDENT OF JENKIN CONTRACTING COMPANY, ON OCTOBER 20, 1967 REQUESTING WRITTEN CONFIRMATION OF THE PROPOSAL. AT THAT TIME MR. IACOVONE WAS INFORMED THAT THE PROPOSAL WAS IN LINE WITH THE GOVERNMENT ESTIMATE; HE WAS NOT INFORMED OF THE SUBSTANTIAL DIFFERENCE IN PRICE BETWEEN THE JENKIN'S PROPOSAL AND THE OTHER PROPOSALS RECEIVED. BY LETTER OF OCTOBER 23, 1967, JENKIN CONFIRMED ITS PROPOSAL IN THE AMOUNT OF $126,705.

BY TELEGRAM OF OCTOBER 30, 1967, GSA ACCEPTED JENKIN'S PROPOSAL AND AUTHORIZED JENKIN TO PROCEED. ON THE SAME DATE, GSA SENT JENKIN A LETTER OF ACCEPTANCE AND REQUESTED JENKIN TO COMPLETE THE CONTRACT DOCUMENTS AND BONDS AND RETURN THEM WITHIN 15 DAYS. THE LETTER OF ACCEPTANCE WAS ACCOMPANIED BY A NOTICE TO PROCEED DATED OCTOBER 30, 1967.

IT IS REPORTED THAT ON NOVEMBER 3, 1967, JENKIN CONTRACTING COMPANY TELEPHONED THE GSA CONTRACTING ACTIVITY TO ADVISE THAT JENKIN HAD MADE AN ERROR IN ITS PROPOSAL OF APPROXIMATELY $39,000 FOR THE ELECTRICAL PORTION OF THE WORK. WITH REGARD TO HOW THE ALLEGED ERROR OCCURRED, WE QUOTE FROM A LETTER DATED JANUARY 12, 1970, FROM JENKIN'S ATTORNEY:

"ON RECEIPT OF OUR SUBCONTRACTORS' BIDS WE ENTERED THEM ON OUR WORK SHEETS. OUR ELECTRICAL CONTRACTOR HAD GIVEN US A FIGURE WHICH WE ENTERED ON OUR SHEETS AT $4100., PLUS 15%, FOR A TOTAL OF $4715. WITH NO PLANS OR SPECIFICATIONS IN OUR HANDS, WE WERE UNABLE TO DOUBLE CHECK THE ACCURACY OF THE FIGURES. WE HAD ASKED MISS O'BRIEN OF THE GENERAL SERVICES ADMINISTRATION FOR ADDITIONAL PLANS AND SPECIFICATIONS BUT WERE TOLD NO OTHERS WERE THEN AVAILABLE. ACCORDINGLY WE TALLIED THE SUBCONTRACTOR'S BIDS AND SUBMITTED THE FIGURE OF $126,705, ON OR ABOUT OCTOBER 18, 1967." COPIES OF THE CONTRACTOR'S WORKSHEETS SUBMITTED WITH THE ADMINISTRATIVE REPORT SHOW THE COMPUTATION OF $4,715 FOR THE ELECTRICAL WORK. IT IS ALLEGED THAT WHEN THE CONTRACTOR ATTEMPTED TO AWARD THE SUBCONTRACT TO JOHN DOMINICK, THE ELECTRICAL SUBCONTRACTOR, IN THE AMOUNT OF $4,100, THE CONTRACTOR LEARNED THAT THE INTENDED PRICE WAS $41,000. IT IS REPORTED THAT THE GSA ESTIMATE FOR THE ELECTRICAL PORTION OF THE WORK WAS $40,275.

WITH REGARD TO THE ALLEGATION THAT JENKIN HAD ASKED FOR ADDITIONAL PLANS AND SPECIFICATIONS, GSA STATED THAT IT IS THEIR POLICY TO PROVIDE A BIDDER WITH AT LEAST TWO SETS OF THE COMPLETE BIDDING DOCUMENTS IN A NEGOTIATED PROJECT SUCH AS THE INSTANT CASE. GSA ALSO REPORTS THAT MISS O'BRIEN DID NOT REFUSE ANY SUCH REQUEST.

IT HAS LONG BEEN THE RULE OF OUR OFFICE TO ACCEPT THE ADMINISTRATIVE VERSION OF DISPUTED FACTS IN THE ABSENCE OF BAD FAITH OR A CLEAR SHOWING OF MISTAKE. NO BASIS EXISTS ON THE RECORD TO OVERCOME THAT PRESUMPTION OF CORRECTNESS. THEREFORE, WE CANNOT CONCLUDE THAT GSA DENIED JENKIN'S REQUEST FOR ADDITIONAL PLANS AND SPECIFICATIONS.

GSA IS OF THE OPINION THAT REFORMATION OF THE CONTRACT IS NOT WARRANTED. THE LETTER OF APRIL 2, 1970, STATES:

"ON THE OTHER ASPECT OF THE MATTER (WHETHER OR NOT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE THAT THERE WAS A MISTAKE IN THE OFFER SO THAT ACCEPTANCE DID NOT RESULT IN A BINDING CONTRACT), WE ARE OF THE VIEW THAT (1) CONSIDERING THAT THE GOVERNMENT ESTIMATE WAS IN LINE WITH THE LOW OFFER (BEING ONLY 6 PERCENT HIGHER) WHEREAS THE REMAINING TWO OFFERS WERE SUBSTANTIALLY HIGHER THAN THE LOW OFFER, THE CONTRACTING OFFICER, AT MOST, HAD NO MORE THAN CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF A MISTAKE; (2) SINCE THE SOLE BASIS FOR SUSPECTING THE POSSIBILITY OF MISTAKE WAS THE RECEIPT OF HIGHER OFFERS FROM COMPETITORS AND SINCE ACTUAL DISCLOSURE OF THAT FACT WAS BARRED BY THE PROHIBITION IN FPR 1-3.805-1(B) THAT 'NO OFFEROR SHALL BE ADVISED OF HIS RELATIVE STANDING WITH OTHER OFFERORS AS TO PRICE..,' THE GOVERNMENT DID ALL THAT WAS PERMISSIBLE TO CONVEY TO THE OFFEROR A SUGGESTION FOR RECHECKING ITS FIGURES; (3) HAVING RECEIVED CONFIRMATION OF AN OFFER SUBSTANTIALLY IN LINE WITH THE GOVERNMENT'S OWN ESTIMATE, THERE WAS CLEARLY NO ATTEMPT IN BAD FAITH TO TAKE ADVANTAGE OF A BID KNOWN TO BE ERRONEOUS."

MISTAKE IN BID PROCEDURES HAVE USUALLY BEEN CONSIDERED IN CONNECTION WITH FORMALLY ADVERTISED PROCUREMENTS. IT IS PRESUMABLY FOR THIS REASON THAT THE SUBJECT IS COVERED IN DETAIL IN FPR PART 1-2. HOWEVER, FPR 1-3.104 SPECIFICALLY APPLIES THE CORRECTION PROCEDURES OF FPR 1 2.406-4 TO MISTAKES ALLEGED AFTER AWARD OF NEGOTIATED CONTRACTS AND WE HAVE CONSIDERED A REQUESTED INCREASE IN CONTRACT PRICE FOR MISTAKE ALLEGED AFTER AWARD OF A NEGOTIATED CONTRACT IN LIGHT OF THE PROVISIONS IN FPR 1- 2. 48 COMP. GEN. 672 (1969).

IT IS OBVIOUS FROM THE SIGNIFICANT DIFFERENCE BETWEEN THE GSA ESTIMATE FOR THE ELECTRICAL PORTION OF THE WORK AND THE AMOUNT PROVIDED IN THE CONTRACTOR'S WORKSHEETS THAT A MISTAKE WAS MADE. HOWEVER, WE HAVE CONSISTENTLY HELD THAT THE RESPONSIBILITY FOR PREPARATION OF A BID OR PROPOSAL RESTS WITH THE OFFEROR. THEREFORE, ONE WHO MAKES A MISTAKE IN A BID OR PROPOSAL WHICH HAS BEEN ACCEPTED IN GOOD FAITH BY THE GOVERNMENT MUST BEAR THE CONSEQUENCES UNLESS THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER HAD EITHER ACTUAL OR CONSTRUCTIVE NOTICE OF THE MISTAKE PRIOR TO AWARD. 48 COMP. GEN. 672 (1969). IT IS EQUALLY WELL ESTABLISHED THAT WHERE ONE PARTY TO A CONTRACT KNOWS OR BECAUSE OF ACCOMPANYING CIRCUMSTANCES SHOULD HAVE KNOWN OF A MATERIAL MISTAKE MADE BY THE OTHER PARTY, HE CANNOT TAKE ADVANTAGE OF THE MISTAKE AND THE PARTY MAKING THE MISTAKE HAS THE RIGHT TO RESCISSION AND RESTITUTION. 48 COMP. GEN. 672 (1969) AND CASES CITED THEREIN.

AS STATED IN THE GSA LETTER DATED MARCH 17, 1970, SIGNED BY THE REGIONAL COUNSEL, JENKIN WAS ASKED TO VERIFY ITS PROPOSAL BECAUSE OF THE SIGNIFICANT PRICE DIFFERENCE BETWEEN IT AND THE SECOND AND THIRD PROPOSALS. AS ALREADY NOTED, JENKIN WAS INFORMED MERELY THAT ITS PROPOSAL WAS IN LINE WITH THE GSA ESTIMATE. WE ARE OF THE OPINION THAT UNDER THE CIRCUMSTANCES, THE REQUEST FOR VERIFICATION WAS MISLEADING AND THEREFORE SHOULD NOT BE USED TO BAR CORRECTION OF THE ERROR.

FPR 1-2.406-3(D)(1) PROVIDES IN PERTINENT PART:

"WHENEVER THE CONTRACTING OFFICER SUSPECTS THAT A MISTAKE MAY HAVE BEEN MADE IN A BID, HE SHALL IMMEDIATELY REQUEST THE BIDDER TO VERIFY THE BID. SUCH REQUEST SHALL INFORM THE BIDDER WHY THE REQUEST FOR VERIFICATION IS MADE -- THAT A MISTAKE IS SUSPECTED AND THE BASIS FOR SUCH SUSPICION; E.G., THAT THE BID IS SIGNIFICANTLY OUT OF LINE WITH THE NEXT LOW OR OTHER BIDS OR WITH THE GOVERNMENT'S ESTIMATE. ***"

GSA CONTENDS THAT IT DID ALL THAT WAS PERMISSIBLE IN REQUESTING VERIFICATION BY ADVISING THAT THE CONTRACTOR'S PROPOSAL WAS IN LINE WITH THE GOVERNMENT ESTIMATE SINCE IT COULD NOT INFORM HIM THAT HIS PRICE WAS MUCH LOWER THAN OTHER PROPOSALS RECEIVED BECAUSE FPR 1-3.805 1(B) PROVIDES THAT "NO OFFEROR SHALL BE ADVISED OF HIS RELATIVE STANDING WITH OTHER OFFERORS AS TO PRICE ***" IN A NEGOTIATED PROCUREMENT. WE NEED NOT PASS ON THE QUESTION WHETHER THE PROHIBITION IN FPR 1-3.805-1(B) SHOULD APPLY SINCE WE ARE OF THE OPINION THAT THE REQUEST WAS MISLEADING BECAUSE OF THE AFFIRMATIVE STATEMENT TO THE CONTRACTOR THAT HIS PRICE WAS IN LINE WITH THE GOVERNMENT ESTIMATE. RATHER, CONSIDERING THE WIDE DISPARITY BETWEEN THE TWO OTHER PROPOSERS' PRICES AND THE GOVERNMENT ESTIMATE, THE REQUEST FOR VERIFICATION STATING THAT THE CONTRACTOR'S PRICE WAS IN LINE WITH THE GOVERNMENT ESTIMATE NOT ONLY DID NOT SERVE THE PURPOSES OF A VERIFICATION, BUT COULD HAVE MISLED THE CONTRACTOR BY CREATING THE IMPRESSION THAT HIS FIGURES WERE REASONABLE. UNDER THE CIRCUMSTANCES, IT IS OUR OPINION THAT THE VERIFICATION BY THE CONTRACTOR DOES NOT PRECLUDE RELIEF FROM THE MISTAKE HE MADE.

ACCORDINGLY, WE CONCLUDE THAT JENKIN SHOULD NOT BE HELD TO THE CONTRACT PRICE. THE RECORD BEFORE US DOES NOT CONTAIN DOCUMENTATION TO PROVE THE PRICE PAID TO THE SUBCONTRACTOR FOR THE ELECTRICAL PORTION OF THE WORK. WE BELIEVE THE AMOUNT OF THE ADJUSTMENT SHOULD BE DETERMINED BY THE AMOUNT ACTUALLY PAID TO THE ELECTRICAL SUBCONTRACTOR (NOT TO EXCEED $40,000), LESS $4,100, PLUS THE MARK-UP PERCENTAGE APPLIED BY JENKIN. REFERENCE SHOULD BE MADE TO THIS DECISION IN THE VOUCHER ON WHICH SUCH PAYMENT IS MADE.