B-171858, APR 22, 1971

B-171858, APR 22, 1971

BID PROTEST - MISTAKE IN BID DECISION ALLOWING INCREASE OF $13,000 IN CONTRACT PRICE BETWEEN ARMY AND LOW BIDDER, C R INDUSTRIES, INC., DUE TO A MISTAKE IN BID FOR LOCK CULVERT VALVES. ALTHOUGH CONTRACTING OFFICER RECEIVED A WRITTEN BID VERIFICATION FROM PROTESTANT, THE RECORD INDICATES THAT THE CONTRACTING OFFICER BELIEVED THE BID TO BE ERRONEOUS AT THE TIME THE AWARD WAS MADE, AND BECAUSE PROTESTANT'S BID WAS MORE THAN 50 PERCENT LOWER THAN THE NEXT LOWEST BID WHICH WOULD JUSTIFY THIS BELIEF, THE CONTRACT PRICE MAY BE INCREASED $13,000, WHICH IS $3,625.83 LOWER THAN THE NEXT LOWEST BID.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER ENGGC-C OF FEBRUARY 3, 1971, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, CONCERNING A MISTAKE IN BID ALLEGED BY C R INDUSTRIES, INC. (CRI), OF CLEVELAND, OHIO, AFTER AWARD TO IT OF CONTRACT NO. DACW23-69-C-0038 AND AFTER COMMENCEMENT OF PERFORMANCE OF THE CONTRACT.

IN EVALUATING THE BIDS, THE CONTRACTING OFFICER SUSPECTED THAT CRI HAD MADE AN ERROR IN ITS BID OF $17,000 SINCE THE PRICE WAS MORE THAN 50 PERCENT LOWER THAN THE NEXT LOWEST BID OF $34,440 AND BECAUSE PRIOR PURCHASES OF IDENTICAL LOCK CULVERT VALVES INDICATED THEIR COST TO BE CONSIDERABLY GREATER THAN THE PRICE BID BY CRI. THE CONTRACTING OFFICER TALKED WITH MR. CHARLES J. DELISIO, PRESIDENT OF CRI, ON JUNE 16, 1969, ADVISED HIM OF THESE FACTS, AND REQUESTED THAT HE RECHECK THE FIGURES USED IN COMPUTING THE BID TO SEE WHETHER OR NOT AN ERROR HAD BEEN MADE IN COMPUTATION OF THE PRICE. MR. DELISIO CALLED A FEW DAYS LATER TO SAY THAT NO ERROR HAD BEEN MADE; THAT HE HAD RECHECKED THE COSTS; AND THAT WHILE HIS COMPANY MIGHT MAKE LITTLE PROFIT ON THE CONTRACT, HE STILL WANTED THE CONTRACT BECAUSE HIS COMPANY WAS NEW AND NEEDED CONTRACTING WORK WITH THE GOVERNMENT. THE CONTRACTING OFFICER, APPARENTLY STILL SUSPECTING THAT SOME MISTAKE IN BID HAD BEEN MADE, ADVISED MR. DELISIO THAT PROCEDURES EXISTED FOR CORRECTING AN ALLEGED MISTAKE IN BID, PROVIDING THE MISTAKE COULD BE PROVED, OR FOR WITHDRAWAL OF THE BID. HOWEVER, MR. DELISIO CHOSE NOT TO PURSUE THE MATTER FURTHER. MR. DELISIO WAS THEN REQUESTED TO PROVIDE A WRITTEN VERIFICATION OF HIS BID, WHICH HE DID BY LETTER OF JUNE 19, 1969. BECAUSE OF THIS WRITTEN VERIFICATION AND A FAVORABLE PREAWARD SURVEY REGARDING CRI'S TECHNICAL AND FINANCIAL ABILITY TO PERFORM THE CONTRACT, THE CONTRACTING OFFICER MADE AN AWARD TO CRI ON JUNE 30, 1969.

AFTER WORK HAD PROGRESSED ON THE CONTRACT, MR. DELISIO ADVISED THE CONTRACTING OFFICER BY LETTER OF JANUARY 26, 1970, OF AN INCREASE OF OVER $3,000 PER UNIT ON THE FOUR CONTRACT ITEMS. THE CONTRACTOR'S ORIGINAL ESTIMATES AND HIS ACTUAL COSTS FOR MATERIALS PURCHASED AND WORK SUBCONTRACTED COMPARED FAVORABLY EXCEPT IN THE AREA OF THE ESTIMATED COSTS FOR PAINTING AND SANDBLASTING. LOW ESTIMATES IN THIS AREA ACCOUNTED FOR THE MORE THAN $3,000 ERROR PER ITEM, WITH THE MAJOR PORTION OF THE ERROR RESULTING FROM THE CONTRACTOR'S LOW ESTIMATE OF THE COST OF HIS OWN SHOP LABOR.

THE CONTRACTING OFFICER HAS STATED THAT THE BID WAS SO OUT OF LINE WITH THE OTHER BIDS THAT IT WAS OBVIOUS THAT A PRICING ERROR HAD BEEN MADE. STATES, FURTHER, THAT AT THE TIME OF THE AWARD HE HAD CONSIDERABLE DOUBT AS TO WHETHER THE CONTRACT COULD BE ACCOMPLISHED FOR THE ORIGINAL ESTIMATED COST. IN RETROSPECT, HE STATES THAT IT WAS UNFAIR TO THE BIDDER TO HAVE AWARDED HIM THE CONTRACT WITHOUT FIRST MAKING A MORE THOROUGH REVIEW OF THE CIRCUMSTANCES, FOR IF HE HAD DONE SO THE CONTRACTOR MIGHT HAVE WITHDRAWN HIS BID ON THE BASIS OF A MISTAKE IN BID. CONSEQUENTLY, HE RECOMMENDS THAT THE CONTRACT PRICE BE INCREASED BY $13,000 FOR A TOTAL CONTRACT PRICE OF $30,814.17, OR $3,625.83 LOWER THAN THE NEXT LOWEST BID RECEIVED. ADMINISTRATIVE REVIEW HAS SHOWN THESE ADDITIONAL COSTS TO BE REASONABLE.

FROM THE FACTS PRESENTED TO US, IT IS APPARENT THAT CRI MADE AN ERROR IN ITS BID. THE GENERAL RULE IS THAT UPON AN UNEQUIVOCAL VERIFICATION, WHICH HAS BEEN REQUESTED BECAUSE OF THE POSSIBILITY OF A MISTAKE IN BID, THE CONTRACTING OFFICER HAS A DUTY TO MAKE THE AWARD TO THE LOW BIDDER, AND AN AWARD MADE ON SUCH A BASIS IS JUSTIFIED.

HOWEVER, IN VIEW OF THE CONTRACTING OFFICER'S APPARENT BELIEF AT THE TIME THE AWARD WAS MADE THAT CRI'S BID WAS ERRONEOUS, AND IN VIEW OF THE GREAT DISPARITY BETWEEN CRI'S BID AND THE NEXT LOW BID WHICH WOULD JUSTIFY THIS BELIEF, WE CONCLUDE THAT IT WOULD BE INEQUITABLE TO HOLD CRI TO ITS ORIGINAL BID. SEE B-139435, MAY 14, 1959, AND B-144165, OCTOBER 12, 1960. THEREFORE, THE CONTRACT PRICE MAY BE INCREASED BY $13,000 AS REQUESTED. B-147090, DECEMBER 21, 1961.

AS REQUESTED, WE ARE RETURNING THE ENCLOSURES ACCOMPANYING THE FEBRUARY 3 LETTER.