B-170134, AUG. 11, 1970

B-170134, AUG. 11, 1970

CONTRACTS -- MISTAKES DECISION HOLDING THAT ANN ARBOR CEILING AND PETITION CO., ARE NOT ENTITLED TO AN UPWARD ADJUSTMENT IN PRICE AS RESULT OF MISTAKE ALLEGED AFTER AWARD OF CONTRACT FOR REMODELING V.A. HOSPITAL AT ANN ARBOR, MICHIGAN. CONTRACTOR WHO AFTER AWARD OF LUMP SUM BID ALLEGED THAT WORKSHEET ESTIMATE FOR PLUMBING OF $150 SHOULD HAVE BEEN $1150 MAY NOT BE ALLOWED RELIEF SINCE CONTRACTING OFFICER IN CASE OF RECEIPT OF ONLY TWO BIDS HAS NO FAIR COMPARISON SUFFICIENT TO BE CHARGED WITH CONSTRUCTIVE NOTICE OF ERROR PARTICULARLY SINCE GOVERNMENT ESTIMATE WAS APPROXIMATELY EQUAL TO LOW BID. THEREFORE, MISTAKE IS UNILATERAL AND THERE IS NO BASIS FOR PRICE ADJUSTMENT.

TO MR. JOHNSON:

REFERENCE IS MADE TO LETTER 134G, DATED JUNE 23, 1970, WITH ENCLOSURES, FROM THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, FORWARDING FOR OUR DECISION A REPORT CONCERNING THE CLAIM OF JOINT BIDDERS, ANN ARBOR CEILING AND PARTITION CO., AND D. A. DAHLMANN BUILDING CO., INC. (ANN ARBOR), FOR AN UPWARD PRICE ADJUSTMENT AS A RESULT OF A MISTAKE IN BID ALLEGED AFTER THE AWARD OF CONTRACT NO. V5237C-193-70, BY THE SUPPLY DIVISION, VETERANS ADMINISTRATION HOSPITAL (VAH), ANN ARBOR, MICHIGAN.

THE INVITATION FOR BIDS (IFB), ISSUED ON NOVEMBER 14, 1969, COVERED THE FURNISHING OF ALL LABOR, MATERIALS, TOOLS AND EQUIPMENT TO REMODEL THE MEDICAL ADMINISTRATION AREA OF THE VAH, BUILDING NO. 1, IN ACCORDANCE WITH DETAILED PLANS AND SPECIFICATIONS. SECTION 5 OF THE IFB'S "GENERAL REQUIREMENTS" CONTAINED SPECIFICATIONS COVERING THE PLUMBING ASPECTS OF THE WORK. TWO BIDS WERE RECEIVED AND OPENED ON DECEMBER 15, 1969, AS FOLLOWS:

MID-CON-CO., INC. - $24,840

ANN ARBOR - 13,040 BY LETTER DATED DECEMBER 19, 1969, THE CONTRACTING OFFICER AWARDED THE CONTRACT TO ANN ARBOR. SUBSEQUENT TO THE EXECUTION AND REQUIRED APPROVAL BY VAH OF THE CLAIMANTS' PERFORMANCE AND PENAL BONDS, THE CLAIMANTS WERE NOTIFIED ON JANUARY 27, 1970, TO PROCEED WITH THE WORK UNDER THE CONTRACT.

ON OR ABOUT MARCH 25, 1970, THE CONTRACTING OFFICER WAS INFORMED VERBALLY BY A REPRESENTATIVE OF THE CONTRACTOR OF AN ERROR IN ITS BID. THE CONTRACTING OFFICER REQUESTED EVIDENCE IN SUPPORT AND SUBSTANTIATION OF THE ALLEGED MISTAKE WITH PERTINENT DOCUMENTATION. BY LETTER DATED MARCH 26, 1970, THE CONTRACTOR FORWARDED ITS ORIGINAL WORKSHEET, ALLEGING THAT THE WORKSHEET'S ESTIMATE OF $150 FOR PLUMBING SHOULD HAVE BEEN $1150, AN ERROR CAUSED BY AN APPARENT MISUNDERSTANDING WHICH OCCURRED DURING A TELEPHONE CONVERSATION PRIOR TO BID SUBMISSION BETWEEN A REPRESENTATIVE OF THE CONTRACTOR AND ITS PROSPECTIVE PLUMBING SUBCONTRACTOR. ON APRIL 1, 1970, THE CONTRACTING OFFICER REQUESTED THE VAH ENGINEERING DIVISION TO ESTIMATE THE COST OF THE PLUMBING PORTION OF THE CONTRACT. THE ENGINEERING DIVISION ADVISED THAT THE ESTIMATED COST OF THE PLUMBING WORK WAS $920. THE GOVERNMENT ESTIMATE ESTABLISHED FOR THE REQUIRED WORK ON THE CONTRACT WAS $10,008, BUT DID NOT INCLUDE THE $920 FOR THE PLUMBING WORK SINCE THAT SUM WAS ADDED DURING FINAL DESIGN. THE ESTIMATE WAS MADE ON FEBRUARY 19, 1969, AND WAS FORMALLY ISSUED ON NOVEMBER 11, 1969. THE REPORT ADVISES THAT LABOR COSTS HAVE RISEN 15-17 PERCENT PER YEAR FOR THE PREVIOUS 4 YEARS AND THAT IT IS "IMPOSSIBLE TO ESTIMATE THE INCREASED COST OF MATERIALS."

THE QUESTION IS NOT WHETHER AN ERROR WAS MADE IN THE BID BUT WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY ITS ACCEPTANCE BY THE GOVERNMENT. SINCE THE ERROR WAS NOT ALLEGED UNTIL AFTER AWARD, ACCEPTANCE OF THE BID RESULTED IN A VALID AND BINDING CONTRACT, AND PRICE ADJUSTMENT IS NOT JUSTIFIED UNLESS THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE MISTAKE PRIOR TO THE AWARD OF THE CONTRACT. 167795, MARCH 16, 1970; B-163953, MAY 6, 1968; AND 37 COMP. GEN. 685 (1958).

WE FIND THAT THE CIRCUMSTANCES OF THIS PROCUREMENT DO NOT SUPPORT THE CONCLUSION THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF THE CLAIMANTS' ERROR IN BID AT OR PRIOR TO THE TIME THE CONTRACT WAS AWARDED. ALTHOUGH THE AMOUNT OF THE ONLY OTHER BID SUBMITTED WAS APPROXIMATELY TWICE THE AMOUNT OF THE CLAIMANTS' LOW BID, SINCE ONLY TWO BIDS WERE SUBMITTED AND NO FAIR COMPARISON CAN BE MADE WHERE ONLY TWO VARIANT BIDS ARE RECEIVED, SUCH A SPREAD IN PRICES IS NOT SUFFICIENT TO HAVE CHARGED THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF ERROR. SEE 45 COMP. GEN. 700, 709 (1966); 20 COMP. GEN. 286, 288 (1940). THIS PRINCIPLE IS PARTICULARLY FOR APPLICATION WHERE, AS HERE, THE GOVERNMENT ESTIMATE, AN IMPORTANT CRITERION IN REVIEWING A CONTRACTING OFFICER'S ERROR DETECTION DUTY WHERE ONLY TWO BIDS ARE RECEIVED, IS APPROXIMATELY EQUAL TO THE LOW BID UNDER REVIEW. SEE ALLIED CONTRACTORS, INC. V UNITED STATES, 310 F. 2D 945 (1962), WHERE THE COURT OF CLAIMS REFUSED TO IMPUTE CONSTRUCTIVE NOTICE OF AN ERROR IN A LOW BID TO A CONTRACTING OFFICER WHERE THE AMOUNT OF THE SECOND LOW BID WAS APPROXIMATELY TWO AND ONE-HALF TIMES THE AMOUNT OF THE LOW BID, AND THE LOW BID WAS IN LINE WITH THE GOVERNMENT ESTIMATE.

ALSO OF IMPORTANCE IN REACHING OUR CONCLUSION IS THE FACT THAT THERE WAS NOTHING ON THE FACE OF THE CLAIMANTS' BID, A LUMP-SUM BID FIGURE FOR PERFORMING THE TOTAL EFFORT UNDER THE CONTRACT, TO INDICATE THAT THE PRICE INSERTED WAS NOT THE PRICE INTENDED.

IN VIEW OF THE FOREGOING, WE FIND THAT THE ERROR IN THE CONTRACTOR'S BID WAS UNILATERAL, AND THE ACCEPTANCE OF THE BID BY THE CONTRACTING OFFICER WITHOUT NOTICE OF ERROR CONSTITUTED A VALID AND BINDING AGREEMENT. THEREFORE, WE MUST CONCLUDE THAT THERE IS NO BASIS FOR PAYMENT OF ANY AMOUNT IN EXCESS OF THE CONTRACT PRICE. AS REQUESTED, THE ENCLOSURES FORWARDED WITH THE SUBMISSION ARE RETURNED HEREWITH.