B-176228, AUG 8, 1972

B-176228, AUG 8, 1972

CONTRACT - MISTAKE IN BID - MARKET APPRAISAL PRICE DECISION DENYING THE REQUEST OF PACIFIC HIDE AND FUR DEPOT FOR EITHER MODIFICATION OR CANCELLATION OF ITS SALES CONTRACT WITH THE CORPS OF ENGINEERS, WALLA WALLA DISTRICT, WASH. SINCE THE OTHER BID PRICES OF $113.40 AND $4,071.60 DID NOT HAVE ANY REASONABLE RELATIONSHIP TO EACH OTHER SO AS TO INDICATE THAT PACIFIC'S BID WAS OUT OF LINE, AND PACIFIC'S BID DID NOT DEPART RADICALLY FROM THE CURRENT MARKET APPRAISAL OF THE MATERIAL, THERE IS NO FIRM BASIS UPON WHICH TO CONCLUDE THAT THE CONTRACTING OFFICER WAS PLACED ON CONSTRUCTIVE NOTICE OF THE ERROR.

TO MR. SECRETARY:

REFERENCE IS MADE TO A REPORT DATED JUNE 9, 1972, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, AND A SUPPLEMENTAL REPORT DATED JULY 13, 1972, FROM THE DEPUTY GENERAL COUNSEL OF THE SAME OFFICE, CONCERNING THE REQUEST OF PACIFIC HIDE AND FUR DEPOT FOR EITHER MODIFICATION OR CANCELLATION OF ITS CONTRACT NO. DACW68-72-S-0211 ON THE BASIS OF A PURPORTED MISTAKE IN ITS BID.

THE SUBJECT CONTRACT WAS AWARDED MAY 3, 1972, PURSUANT TO INVITATION FOR BIDS NO. DACW68-72-S-0071, ISSUED APRIL 4, 1972, BY THE WALLA WALLA DISTRICT, CORPS OF ENGINEERS, WALLA WALLA, WASHINGTON. THE SUBJECT IFB SOLICITED BIDS FOR THE SALE OF APPROXIMATELY 54 TONS OF SCRAP METAL, TYPE 410S CORROSION RESISTANT STAINLESS STEEL, LOCATED AT THE DWORSHAK DAM CONSTRUCTORS STORAGE YARD, AHSAHKA, IDAHO.

BIDS WERE OPENED MAY 2, 1972, REVEALING THE SUBMISSION OF BIDS BY THREE FIRMS, WITH PACIFIC'S PRICE THE HIGHEST AT $8,802, FOLLOWED BY ATLAS MINE AND MILL SUPPLY AT $4,071.60 AND ALASKA STEEL AND SUPPLY COMPANY AT $113.40. THE ATLAS BID WAS REJECTED AS NONRESPONSIVE FOR FAILURE TO SUBMIT A BID DEPOSIT.

THE RECORD STATES THAT ON MAY 5, 1972, TWO DAYS FOLLOWING AWARD, THE CONTRACTOR ORALLY NOTIFIED THE CONTRACTING OFFICER THAT IT HAD ERRED IN SUBMITTING ITS BID PRICE BY FAILING, DURING AN INSPECTION OF THE MATERIAL PRIOR TO BID OPENING, TO PERFORM A SIMPLE MAGNETIC TEST. THE CONTRACTOR ALSO ALLEGED THAT IT FAILED TO NOTE THAT THE ADVERTISED MATERIAL WAS TYPE 410S. BY LETTER OF MAY 8, 1972, THE CONTRACTOR REITERATED ITS CLAIM OF MISTAKE, ALLEGING THAT THE MATERIAL OFFERED WAS A MAGNETIC STAINLESS STEEL OF A MUCH LOWER GRADE THAN THAT FOR WHICH IT THOUGHT IT WAS SUBMITTING A BID, AND HAD IT BEEN COGNIZANT OF THAT FACT, ITS BID WOULD NOT HAVE EXCEEDED $50 PER TON, OR A TOTAL OF $2,700. ACCORDINGLY, THE LETTER REQUESTED MODIFICATION OF THE CONTRACT PRICE TO $2,700 OR, IN THE ALTERNATIVE, CANCELLATION THEREOF.

AS A GENERAL RULE, IF A BIDDER MAKES A UNILATERAL MISTAKE, AS HERE, HE IS BOUND BY THE CONTRACT AWARDED UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE MISTAKE AT THE TIME OF AWARD. IF THE CONTRACTING OFFICER WAS ACTUALLY OR CONSTRUCTIVELY AWARE OF THE MISTAKE, THE CONTRACT IS VOIDABLE AT THE PURCHASER'S OPTION. SEE 49 COMP. GEN. 199, 201 (1969), AND CASES CITED THEREIN.

WHILE IN SOME CIRCUMSTANCES THE DIFFERENCE BETWEEN PACIFIC'S PRICE AND THE PRICE OF THE NEXT HIGH BID ON THE SCRAP METAL MIGHT BE SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF AN ERROR, THE CONTRACTING OFFICER WAS IN POSSESSION OF INFORMATION AS TO THE REASONABLE VALUE OF THE STEEL, WHICH APPEARS TO BE OF GREATER SIGNIFICANCE THAN AN ANALYSIS OF THE BID PRICES IN THIS CASE, SINCE THE BID PRICES DO NOT REFLECT A COMMON GROUPING. THE RECORD STATES THAT DURING THE PERIOD IN WHICH BID PACKAGES WERE MAILED TO THE PROSPECTIVE BIDDERS, TWO DEALERS OF SCRAP METAL (OTHER THAN THE PROSPECTIVE BIDDERS) WERE CONTACTED IN ORDER TO ASCERTAIN THE GOING PRICE OF THE REFERENCED MATERIAL IN SCRAP FORM. ONE OF THE LARGER DEALERS IN PORTLAND, OREGON, CITED A PRICE OF 5 1/2 TO 7 CENTS PER POUND, WHILE A DEALER IN TACOMA, WASHINGTON, QUOTED A PRICE OF "AROUND 6 CENTS" A POUND. (PACIFIC'S BID PRICE EQUATES TO APPROXIMATELY 8 CENTS PER POUND.) IT IS REPORTED THAT THESE PRICES HAD BEEN OBTAINED WITHIN 15 DAYS OF BID OPENING, DURING WHICH TIME THE CONTRACTING OFFICER WAS ADVISED THAT THE SCRAP PRICE OF THE REFERENCED STEEL WAS "NOT VERY GOOD AT THIS TIME." NO RECHECK OF THE GOING PRICE WAS MADE AT THE TIME OF AWARD AND THE PRICES OBTAINED FROM THE DEALERS WERE REGARDED AS FAIR CURRENT MARKET PRICES FOR THE STEEL. IN VIEW THEREOF, WE DO NOT BELIEVE THAT THE DIFFERENCE BETWEEN PACIFIC'S BID PRICE AND THE FAIR MARKET PRICE, AS DETERMINED BY THE CONTRACTING OFFICER, WAS SUFFICIENT TO PLACE THE CONTRACTING OFFICER ON CONSTRUCTIVE NOTICE OF THE PROBABILITY OF AN ERROR IN PACIFIC'S BID.

ACCORDINGLY, SINCE THE OTHER BID PRICES OF $113.40 AND $4,071.60 DID NOT HAVE ANY REASONABLE RELATIONSHIP TO EACH OTHER TO INDICATE THAT PACIFIC'S PRICE WAS OUT-OF-LINE, AND CONSIDERING THE FACT THAT PACIFIC'S BID PRICE DID NOT DEPART RADICALLY FROM THE CURRENT MARKET APPRAISAL OF THE REFERENCED MATERIAL, WE ARE WITHOUT A FIRM BASIS UPON WHICH TO CONCLUDE THAT THE CONTRACTING OFFICER WAS PLACED ON CONSTRUCTIVE NOTICE OF THE PROBABILITY OF AN ERROR IN PACIFIC'S BID.

WE THEREFORE CONCUR WITH THE ADMINISTRATIVE RECOMMENDATION THAT THE CONTRACTOR NOT BE RELEASED FROM THE CONTRACT AS AWARDED.

THE FILE TRANSMITTED WITH THE REPORTS OF JUNE 9 AND JULY 13, 1972, IS RETURNED.