B-172467, DEC 9, 1971

B-172467, DEC 9, 1971

CONTRACTS - ALLEGED MISTAKE IN PROPOSAL - RELIEF DENIED DECISION DENYING RELIEF TO ITEK CORPORATION FOR ALLEGED MISTAKE IN ITS PROPOSAL MADE UNDER AN RFP ISSUED BY THE DEPARTMENT OF THE AIR FORCE FOR "INSPECTION AND REPAIR AS NECESSARY" SERVICES ON 50 AIR FORCE T-39A AIRCRAFT AND 16 NAVY T-39D AIRCRAFT, ON AN ALL-OR-NOTHING BASIS. IT IS CONTENDED, THAT BECAUSE OF A 104% VARIATION BETWEEN THE PER UNIT PRICE OF ITEK AND THE NEXT LOW PER UNIT PRICE FOR THE 16 T-39D AIRCRAFT, THAT THE POSSIBILITY OF ERROR WAS PATENTLY OBVIOUS TO THE CONTRACTING OFFICER. ITEK WAS INFORMED BY GOVERNMENT OFFICERS ON SEVERAL OCCASIONS THAT THEY BELIEVED ITS MANHOUR ESTIMATES WERE QUITE LOW. BY TELEGRAM, ITEK WAS REQUESTED TO VERIFY THAT IT UNDERSTOOD THE SCOPE OF WORK AND THE AMOUNT OF EFFORT REQUIRED. ITEK RESPONDED AFFIRMATIVELY. UNDER THESE CIRCUMSTANCES, AND AS THE OVERALL PRICE OFFERED BY ITEK WAS ONLY 4% LOWER THAN THE NEXT LOW OFFEROR ON THIS ALL-OR-NOTHING SOLICITATION, IT CANNOT BE SAID THAT THE CONTRACTING OFFICER HAD NOTICE OF ANY ERROR.

TO REAVIS, POGUE, NEAL & ROSE:

REFERENCE IS MADE TO YOUR LETTERS DATED MARCH 26, JULY 12 AND SEPTEMBER 23, 1971, REQUESTING, ON BEHALF OF ITEK CORPORATION, RELIEF FROM AN ALLEGED MISTAKE IN ITS PROPOSAL UPON WHICH NEGOTIATED DEPARTMENT OF THE AIR FORCE CONTRACT NO. F04606-68-C-1016 WAS BASED.

ON APRIL 10, 1968, THE SACRAMENTO AIR MATERIEL AREA (SMAMA), DIRECTORATE OF PROCUREMENT AND PRODUCTION, MCCLELLAN AIR FORCE BASE, CALIFORNIA, ISSUED SOLICITATION NO. F04606-68-R-0611 REQUESTING OFFERS FOR PERFORMING CERTAIN INSPECTION AND REPAIR AS NECESSARY ("IRAN") SERVICES ON, AND MAINTENANCE AND REPAIR OF 50 AIR FORCE T-39A AIRCRAFT. THE REQUEST FOR PROPOSALS (RFP) SPECIFIED A CLOSING DATE OF MAY 10, 1968, FOR RECEIPT OF PROPOSALS. BY AMENDMENTS 1 AND 2 DATED APRIL 19 AND 30, 1968, THE CONTRACTING ACTIVITY ADDED THE REQUIREMENT TO REWORK 16 NAVY T-39D AIRCRAFT TO DIFFERENT WORK SPECIFICATIONS UNDER DIFFERENT GOVERNMENT- FURNISHED MATERIAL CRITERIA. THE BASIS OF AWARD CLAUSE, PART XXIV OF THE RFP, PROVIDED THAT AWARD WOULD BE MADE ON AN ALL-OR-NONE BASIS AND THAT THE TOTAL NUMBER OF FIXED ITEMS WOULD BE USED TO DETERMINE THE LOWEST PROPOSAL. THE PROPOSALS WERE FOR A ONE YEAR CONTRACT WITH AN OPTIONAL TWO -YEAR FOLLOW-ON CLAUSE.

EIGHT OFFERS WERE RECEIVED RANGING FROM $975,754.14 TO $1,807,662.37, THE LOWEST OF WHICH WAS SUBMITTED BY ITEK. BY TELEGRAM DATED MAY 16, 1968, ITEK WAS REQUESTED TO VERIFY THAT IT HAD NOT UNDERESTIMATED THE EFFORT REQUIRED TO PERFORM THE AMOUNT OF WORK SPECIFIED. IN A LETTER DATED MAY 16, 1968, ITEK ADVISED THE CONTRACTING OFFICE THAT IT FULLY UNDERSTOOD THE SCOPE OF THE WORK AND THE AMOUNT OF EFFORT REQUIRED TO PERFORM THE WORK AS SPECIFIED IN THE SOLICITATION AND THAT IT WAS CONFIRMING ITS PROPOSAL AT THAT TIME. ON MAY 18, 1968, CONTRACT NO. F04606-68-C-1016 WAS AWARDED TO ITEK AS THE LOWEST RESPONSIVE OFFEROR.

IN YOUR LETTER OF MARCH 26, 1971, YOU STATE:

"THE FOUR LOWEST BIDS ON THE BASIC AIR FORCE T-39A AIRCRAFT WERE AS FOLLOWS:

UNIT PRICE UNIT PRICE

BIDDER FY-68 10 ACFT. FY-69 40 ACFT.

ITEK 5,514 4,898

HAYES INTERNATIONAL 6,100 5,776

AERO CORPORATION 6,300 6,300

FAIRCHILD HILLER CORP. 8,303 7,464

"ITEK'S RESPONSE INCLUDED A BID OF $6,698.00 PER UNIT FOR SERVICES ON THE T-39D AIRCRAFT. AS SHOWN IN THE FOLLOWING COMPARISON, ITEK'S BID ON THIS PORTION OF THE CONTRACT WAS APPROXIMATELY HALF THAT OF THE NEXT LOW BIDDER, AND ABOUT ONE-THIRD THAT OF THE AVERAGE OF ALL THE REMAINING BIDDERS:

BIDDER UNIT PRICE

ITEK $ 6,698.00

HAYES INTERNATIONAL 13,640.22

AERO CORPORATION 14,571.00

NORTHWEST INDUSTRIES, LTD. 18,750.00

ALL AMERICAN MAINTENANCE, INC. 18,750.00

FAIRCHILD HILLER CORP. 19,282.00

LOCKHEED AIRCRAFT SERVICES CO. 33,978.00

NORTH AMERICAN ROCKWELL CORP. 34,119.32"

YOU REFER TO PARAGRAPH 2-406.3 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) WHICH PROVIDES IN PERTINENT PART AS FOLLOWS:

"(1) IN THE CASE OF ANY SUSPECTED MISTAKE IN BID, THE CONTRACTING OFFICER WILL IMMEDIATELY CONTACT THE BIDDER IN QUESTION CALLING ATTENTION TO THE SUSPECTED MISTAKE, AND REQUEST VERIFICATION OF HIS BID. THE ACTION TAKEN TO VERIFY BIDS MUST BE SUFFICIENT TO EITHER REASONABLY ASSURE THE CONTRACTING OFFICER THAT THE BID AS CONFIRMED IS WITHOUT ERROR OR ELICIT THE ANTICIPATED ALLEGATIONS OF A MISTAKE BY THE BIDDER. TO INSURE THAT THE BIDDER CONCERNED WILL BE PUT ON NOTICE OF A MISTAKE SUSPECTED BY THE CONTRACTING OFFICER, THE BIDDER SHOULD BE ADVISED, AS IS APPROPRIATE, OF (I) THE FACT THAT HIS BID IS SO MUCH LOWER THAN THE OTHER BID OR BIDS AS TO INDICATE A POSSIBILITY OF ERROR, (II) IMPORTANT OR UNUSUAL CHARACTERISTICS OF THE SPECIFICATIONS, (III) CHANGES IN REQUIREMENTS FROM PREVIOUS PURCHASES OF A SIMILAR ITEM, OR (IV) SUCH OTHER DATA PROPER FOR DISCLOSURE TO THE BIDDER AS WILL GIVE HIM NOTICE OF THE SUSPECTED MISTAKE."

YOU CONTEND THAT BECAUSE OF THE 104-PERCENT VARIATION BETWEEN ITEK'S PROPOSAL OF $6,698 PER UNIT FOR THE 16 NAVY T-39D AIRCRAFT AND THE NEXT LOWEST PROPOSAL OF $13,640.22 PER UNIT SUBMITTED BY HAYES INTERNATIONAL CORPORATION, THE ERROR IN ITEK'S PROPOSAL SHOULD HAVE BEEN PATENTLY OBVIOUS TO THE CONTRACTING OFFICER WHEN ANALYZING AND COMPARING THE COMPETING PROPOSALS PRIOR TO AWARD. YOU FURTHER CONTEND THAT THE PROCEDURE FOLLOWED BY THE CONTRACTING OFFICER IN REQUESTING VERIFICATION OF ITEK'S OFFER DID NOT MEET THE STANDARDS REQUIRED BY ASPR 2-406.3 IN THAT IT FAILED TO DIRECT ITEK'S ATTENTION TO ITS COMPUTATION OF PRICE, AND IT DID NOT SINGLE OUT THE NAVY T-39D ELEMENT OF THE PROPOSAL. YOU MAINTAIN THAT ITEK IS ENTITLED TO A READJUSTMENT OF THE CONTRACT PRICE FOR SERVICES ON THE NAVY T-39D AIRCRAFT SINCE IN LIKE SITUATIONS OF PATENT ERROR, WHERE THE CONTRACTING OFFICER FAILED TO ADEQUATELY VERIFY THE BIDDER'S PRICE, OUR OFFICE HAS DIRECTED THAT PAYMENT MAY BE MADE TO THE CONTRACTOR ON A QUANTUM MERUIT BASIS, NOT TO EXCEED THE NEXT LOW OFFEROR'S PRICE. ON THE BASIS OF THE NUMBER OF UNITS INVOLVED AND THE DIFFERENCE BETWEEN ITEK'S UNIT PRICE AND THE UNIT PRICE QUOTED BY THE NEXT LOW OFFEROR ON THE 16 NAVY T-39D AIRCRAFT, THE TOTAL AMOUNT OF THE REQUESTED INCREASE IS $111,075.52.

THE CONTRACTING OFFICER REPORTS THAT ITEK'S TOTAL EVALUATED PRICE WAS $975,754.14 AND THAT ITEK WAS THE LOW OFFEROR BY ONLY $41,252.36, WHICH FIGURE IS ONLY 4 PERCENT LOWER THAN THE NEXT LOW OFFEROR'S TOTAL EVALUATED PRICE, AND THAT THE ONLY REASON FOR ANY VERIFICATION OF ITEK'S PROPOSAL WAS BECAUSE THE T-39A IPAN REQUIREMENT HAD NOT PREVIOUSLY BEEN COMPETED. IT IS STATED THAT THE CONTRACTING OFFICE CONSIDERED IT PRUDENT UNDER THIS SITUATION TO DETERMINE ITEK'S UNDERSTANDING OF THE WORK REQUIRED AND THAT ITS MAXIMUM ESTIMATE FOR CERTAIN ELEMENTS OF WORK WAS REASONABLE. IT IS FURTHER REPORTED THAT IN ADDITION TO THE CONTRACTING OFFICER'S TELEGRAM OF MAY 15, 1968, REQUESTING VERIFICATION THAT ITEK HAD NOT UNDERESTIMATED THE EFFORT REQUIRED TO PERFORM THE AMOUNT OF WORK SPECIFIED, THE DIRECTOR OF ITEK'S LINCOLN AEROSPACE DIVISION MET WITH SMAMA PERSONNEL ON OR ABOUT MAY 20, 1968, AND THAT AT THIS MEETING SMAMA PERSONNEL EXPLAINED TO ITEK'S DIRECTOR THAT THEY THOUGHT THAT THE MAN-HOURS BID BY ITEK WERE QUITE LOW. WHEN THE DIRECTOR WAS ASKED WHETHER HE WISHED TO CHANGE ANY PART OF ITEK'S PROPOSAL, HE REPORTEDLY REPLIED THAT HIS PEOPLE WHO PRICED THE RFP WERE EXPERTS AND THAT HE HAD NO DESIRE TO CHANGE ANY FIGURES. THE RECORD INDICATES THAT AT ANOTHER MEETING HELD THAT SAME DAY ITEK'S DIRECTOR WAS AGAIN QUESTIONED ABOUT THE LOWNESS OF ITEK'S PROPOSAL AND THAT HE REPLIED HE WAS SATISFIED WITH HIS COMPANY'S PROPOSAL.

NOTWITHSTANDING THE SUBSTANTIAL PRICE DIFFERENCE BETWEEN ITEK'S OFFER FOR THE REPAIR OF THE NAVY T-39D AIRCRAFT AND THE OTHER OFFERS RECEIVED ON THE NAVY WORK, SUCH DIFFERENCE IS NOT CONTROLLING UNDER THE CIRCUMSTANCES OF THIS CASE. AS STATED ABOVE, THE SOLICITATION PROVIDED THAT AWARD FOR THE REPAIR OF THE AIR FORCE AND NAVY AIRCRAFT WOULD BE ON AN ALL-OR-NONE BASIS. IN OTHER WORDS, AWARD WAS REQUIRED TO BE MADE TO THE LOWEST AGGREGATE OFFEROR ON BOTH THE AIR FORCE AND NAVY PORTIONS OF THE SOLICITATION. IT IS NOTED FROM THE RFP THAT PROSPECTIVE OFFERORS WERE REQUESTED TO QUOTE UNIT AND/OR LUMP-SUM PRICES FOR THE VARIOUS ITEMS LISTED IN THE RFP. OUR OFFICE AND THE COURTS HAVE HELD THAT A CONTRACTING OFFICER ORDINARILY IS NOT UNDER A DUTY TO COMPARE BID PRICES ON INDIVIDUAL ITEMS WHERE AWARD IS TO BE MADE IN THE AGGREGATE. SEE 17 COMP. GEN. 534 (1937); 42 ID. 383 (1963).

IN THIS REGARD, THE CONTRACTING OFFICER HAS REPORTED THAT HE WAS NOT ON CONSTRUCTIVE NOTICE OF THE POSSIBILITY OF ERROR PRIOR TO AWARD BECAUSE THE DIFFERENCE BETWEEN ITEK'S LOW AGGREGATE OFFER AND THE NEXT LOWEST AGGREGATE OFFER WAS ONLY 4 PERCENT. IN OUR VIEW, THIS 4-PERCENT DISCREPANCY WAS NOT SUFFICIENTLY GREAT TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF THE CLAIMED MISTAKE. SO FAR AS THE PRESENT RECORD SHOWS, THE ACCEPTANCE OF ITEK'S OFFER WAS MADE IN GOOD FAITH. THEREFORE, EVEN IF WE ASSUME THAT AN ERROR WAS, IN FACT, MADE, NO BASIS EXISTED IN OUR OPINION, FOR CHARGING THE CONTRACTING OFFICER WITH ACTUAL OR CONSTRUCTIVE NOTICE OF ITEK'S ALLEGED ERROR AND NO BASIS NOW EXISTS FOR CHALLENGING THE ADEQUACY OF THE VERIFICATION REQUESTED OF ITEK BEFORE THE AWARD WAS MADE.

FURTHER, ALTHOUGH IT IS NOW ALLEGED THAT THE ITEK PRICE ON THE NAVY T 39D PORTION OF THE CONTRACT WAS SO LOW AS TO CONSTITUTE A PATENT ERROR, WE NOTE THAT NO ERROR WAS EVEN ALLEGED BY THE FIRM UNTIL MORE THAN 2 1/2 YEARS AFTER DATE OF THE AWARD. SINCE THERE IS NOTHING IN THE RECORD TO INDICATE THAT WHEN SUBMITTED THE OFFER WAS NOT AS INTENDED, THE CONCLUSION IS WARRANTED THAT ITEK'S REQUEST FOR RELIEF IN THIS CASE IS SOLELY AN ATTEMPT TO AVOID THE CONSEQUENCES OF WHAT HAS BECOME AN ILL-ADVISED OFFER. SEE 11 COMP. GEN. 445 (1932); 14 ID. 612 (1935); 50 COMP. GEN 39 (1970). THE ACCEPTANCE OF THE OFFER UNDER THE CIRCUMSTANCES INVOLVED, THEREFORE, CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO. SEE EDWIN DOUGHERTY AND M. H. OGDEN V UNITED STATES, 102 CT. CL. 249, 259 (1944), AND SALIGMAN V UNITED STATES, 56 F. SUPP. 505, 507 (1944).

ACCORDINGLY, YOUR REQUEST ON BEHALF OF ITEK FOR RELIEF MUST BE DENIED. SEE 47 COMP. GEN. 732 (1968).