B-175630, MAY 11, 1972

B-175630, MAY 11, 1972

CONTRACT - SURPLUS SALES - ALLEGED ERROR IN BID - REQUEST FOR REFORMATION CONCERNING A REQUEST OF APPLEBAUM IRON & METAL, INC., FOR REFORMATION OF A CONTRACT AWARDED UNDER AN IFB ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, FORT WORTH, TEX., FOR SURPLUS GOVERNMENT PROPERTY, DUE TO AN ALLEGED ERROR IN BID. THE CONTRACT MAY BE REFORMED WITHOUT LIABILITY TO THE CORPORATION SINCE THE AMOUNT OF APPLEBAUM'S BID PRICE SHOULD HAVE PUT THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR.

TO GENERAL WALLACE H. ROBINSON:

REFERENCE IS MADE TO A LETTER DATED APRIL 3, 1972, DSAH-G, WITH ENCLOSURES, FROM THE ASSISTANT COUNSEL, HEADQUARTERS, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR ALLEGED BY APPLEBAUM IRON & METAL, INC. (APPLEBAUM) TO HAVE BEEN MADE IN ITS BID UPON WHICH SALES CONTRACT NO. 37-2119-033 IS BASED.

THE DEFENSE SURPLUS SALES OFFICE, FORT WORTH, TEXAS, BY INVITATION FOR BIDS NO. 37-2119, REQUESTED BIDS FOR THE PURCHASE OF 164 ITEMS OF SURPLUS GOVERNMENT PROPERTY, INCLUDING ITEM 93 DESCRIBED AS 50 GROSS TONS OF "STEEL, NO. 2 BUNDLES, SCRAP" AND ITEM 94 DESCRIBED AS 50 GROSS TONS OF "STEEL, PREPARED, #2 HVY., MELTING, SCRAP." IN RESPONSE, APPLEBAUM SUBMITTED A BID DATED MARCH 14, 1972, OFFERING TO PURCHASE THE FOLLOWING ITEMS:

ITEM NO. DESCRIPTION UNIT PRICE BID

93 STEEL, NO. 2 BUNDLES, SCRAP $31.51

94 STEEL, PREPARED, #2 HVY, MELTING,

SCRAP 20.00

95 ALUMINUM, CLEAN, SCRAP 12.10

96 ALUMINUM, IRONY, SCRAP .055

97 COPPER, SCRAP .2120

THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEMS 93 AND 96 ON MARCH 20, 1972, WITHOUT VERIFICATION.

IT IS REPORTED THAT ON MARCH 20, 1972, THE PRESIDENT OF THE CORPORATION TELEPHONED THE CONTRACTING OFFICER AND ALLEGED THAT AN ERROR HAD BEEN MADE IN APPLEBAUM'S BID ON ITEMS 93 AND 94. IN A LETTER DATED MARCH 20, 1972, THE PRESIDENT OF APPLEBAUM STATED THAT IN TRANSFERRING THE CORPORATION'S PRICES FROM ITS BID PREPARATION SHEET TO THE BID FORM, HE REVERSED THE PRICES INTENDED FOR ITEMS 93 AND 94. HE FURTHER STATED THAT DURING THE MONTH OF MARCH 1972, APPLEBAUM WAS PAID BY LONE STAR STEEL ONLY $25.50 PER GROSS TON FOR DELIVERY OF NO. 2 BUNDLES OF SCRAP STEEL, AND REQUESTED THAT THE SALES CONTRACT BE REFORMED BY DELETING ITEM 93 WITHOUT LIABILITY TO THE CORPORATION.

THE ABSTRACT OF BIDS SHOWS THAT THERE WERE TWO BIDS ON ITEM 93: $31.51 AND $19.30. IT HAS BEEN REPORTED THAT THE CURRENT MARKET APPRAISAL FOR ITEM 93, WHICH WAS KNOWN TO THE CONTRACTING OFFICER PRIOR TO BID OPENING, WAS $24 PER GROSS TON.

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 (E.D. PA. 1944). IF THE CONTRACTING OFFICER WAS ACTUALLY OR CONSTRUCTIVELY AWARE OF THE MISTAKE, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. WENDER PRESSES, INC. V. UNITED STATES, 343 F.2D 961 (CT. CL. 1965); KEMP V. UNITED STATES, 38 F. SUPP. 568 (D. MD. 1941). 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 ON USEABLE ITEMS 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 (S.D.N.Y. 1957), AFFIRMED 253 F.2D 956 (2D CIR. 1958). 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 USE TO WHICH IT MAY BE PUT. 49 COMP. GEN. 199 (1969); B-174900, MARCH 7, 1972; B 174321, NOVEMBER 23, 1971.

THE DIFFERENCE BETWEEN THE OTHER BID AND APPLEBAUM'S HIGH BID ON ITEM 93 WAS $12.21 PER GROSS TON AND THE DIFFERENCE BETWEEN APPLEBAUM'S HIGH BID ON THE THEN CURRENT MARKET APPRAISAL VALUE WAS $7.50 PER GROSS TON. THE CONTRACTING OFFICER ADMITS THAT BECAUSE OF THESE CIRCUMSTANCES, HE SHOULD HAVE BEEN ON NOTICE OF THE PROBABILITY OF ERROR IN THE BID OF THE CORPORATION AND THAT BID CONFIRMATION SHOULD HAVE BEEN REQUESTED PRIOR TO AWARD.

ACCORDINGLY, AS ADMINISTRATIVELY RECOMMENDED, CONTRACT NO. 37-2119 033 MAY BE REFORMED BY THE DELETION OF ITEM 93 WITHOUT LIABILITY TO THE CORPORATION.