B-177506, FEB 22, 1973

B-177506, FEB 22, 1973

OFFICE SPACE CONTRACT - MISTAKE IN BID - MODIFICATION OF LEASE DECISION DENYING RELIEF TO DOWNS, RACHLIN AND MARTIN FOR AN ALLEGED MISTAKE IN ITS BID UNDER AN IFB ISSUED BY THE FARMERS HOME ADMINISTRATION FOR THE LEASING OF OFFICE SPACE IN ST. JOHNSBURY, VT., ON THE BASIS OF WHICH IT WAS AWARDED A CONTRACT. GAO WILL ONLY GRANT RELIEF FOR A MISTAKE IN BID IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. 45 COMP. GEN. 700 (1966). MOREOVER, THERE IS NO AUTHORITY TO MODIFY THE TERMS OF THE LEASE UNDER THIS CONTRACT IN THE ABSENCE OF LEGAL CONSIDERATION MOVING TO THE GOVERNMENT. 47 COMP. GEN. 732, 736 (1968).

TO MR. ALBERT J. GEIGER:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 5, 1973, WITH ENCLOSURE, REQUESTING A DECISION ON AN ALLEGED MISTAKE IN BID BY THE LAW FIRM OF DOWNS, RACHLIN AND MARTIN (DOWNS), ST. JOHNSBURY, VERMONT.

THE RECORD INDICATES THAT THE FARMERS HOME ADMINISTRATION ISSUED THE INVITATION TO BID NO. N-73-3 ON AUGUST 22, 1972, FOR THE LEASING OF APPROXIMATELY 635 SQUARE FEET OF OFFICE SPACE IN ST. JOHNSBURY WITH OCCUPANCY TO COMMENCE NOVEMBER 1, 1972. ONE OF THE REQUIREMENTS WAS THAT FHA WOULD HAVE AN OPTION TO RENEW THE LEASE THROUGH JUNE 30, 1977. DOWNS SUBMITTED THE ONLY RESPONSIVE BID UNDER THE INVITATION WHICH INCLUDED THE FOLLOWING LANGUAGE:

THE GOVERNMENT DESIRES THE RIGHT OF AN OPTION TO RENEW ANY LEASE RESULTING FROM THIS BID FROM YEAR-TO-YEAR UNTIL JUNE 30, 1977, UNDER THE SAME TERMS AND CONDITIONS AS THE ORIGINAL LEASE *** BIDDER GRANTS RENEWAL OPTION UNTIL JUNE 30, 1977.

THE MONTHLY RENTAL BID BY DOWNS WAS $265.00. FHA ACCEPTED DOWNS' OFFER ON SEPTEMBER 25, 1972. THEREAFTER, A LEASE (STANDARD FORM 2) WAS DRAWN UP BASED UPON THE TERMS OF THE BID AND THE INVITATION WHICH STATED IN PARAGRAPH 5:

THIS LEASE MAY BE RENEWED AT THE OPTION OF THE GOVERNMENT, FOR THE FOLLOWING TERMS AND AT THE FOLLOWING RENTALS: FROM YEAR TO YEAR AT A RENTAL OF $265.00 PER MONTH PROVIDED THAT NO RENEWAL THEREOF SHALL EXTEND THE PERIOD OF OCCUPANCY BEYOND JUNE 30, 1977. ***

HOWEVER, UPON RECEIPT OF THE LEASE, DOWNS STRUCK OUT LANGUAGE IN PARAGRAPH 5 "AT A RENTAL OF $265.00 PER MONTH" AND EXECUTED THE LEASE. DOWNS ADVISED THAT IT INADVERTENTLY OMITTED FROM THE BID A PROVISION WHICH WOULD HAVE STATED THAT THE RENT WOULD BE SUBJECT TO NEGOTIATION ON AN ANNUAL BASIS ON AND AFTER JUNE 1, 1974, TO COVER EXPECTED INCREASES IN COSTS. DOWNS FURTHER ADVISED THAT SUCH PROVISION WAS CONSISTENT WITH EVERY OTHER LEASE DOWNS HAD ENTERED INTO WITH OCCUPANTS OF THE BUILDING. WHILE THE HEAD OF THE USING FACILITY STATED THAT THE BID PROPOSAL WAS TO CONTAIN AN ESCALATION CLAUSE WHICH WOULD HAVE BEEN INCLUDED IN THE LEASE, THAT IT WAS THE LESSOR'S INTENT TO HAVE SUCH A CLAUSE INCLUDED, AND THAT SUCH PROVISION WOULD BE FAIR TO BOTH PARTIES, WE NOTE THAT THE ASSISTANT CHIEF, BUSINESS SERVICES BRANCH, WHO WAS THE CONTRACTING OFFICER AND HAD THE AUTHORITY TO BIND THE GOVERNMENT, ADVISED THE ADMINISTRATOR, FARMERS HOME ADMINISTRATION, THAT "WE HAVE NO LEASES IN VERMONT WITH ESCALATION CLAUSES.

SINCE DOWNS' OFFER WAS RESPONSIVE TO THE INVITATION AND WAS ACCEPTED THEREUNDER, A BINDING LEASE CONTRACT WAS CONSUMMATED. THE MISTAKE WAS NOT ALLEGED UNTIL AFTER ACCEPTANCE BY THE GOVERNMENT AND WE FIND NOTHING IN THE RECORD TO ESTABLISH THAT THE CONTRACTING OFFICER WAS ON NOTICE, ACTUAL OR CONSTRUCTIVE, OF DOWNS' ALLEGED MISTAKE PRIOR TO ACCEPTANCE OF ITS OFFER. IN THIS REGARD, OUR OFFICE WILL GRANT RELIEF ONLY IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. 45 COMP. GEN. 700 (1966); 47 ID. 732 (1968). WHILE IT MAY HAVE BEEN DOWNS' PRIOR PRACTICE TO INCLUDE SUCH A PROVISION IN ITS LEASES, SUCH CIRCUMSTANCE AFFORDS NO BASIS FOR GRANTING RELIEF. MOREOVER, ON THE RECORD, THERE IS NO AUTHORITY TO MODIFY THE TERMS OF THE LEASE TO PROVIDE FOR RENTAL NEGOTIATION ON AND AFTER JUNE 1, 1974, IN THE ABSENCE OF ADEQUATE LEGAL CONSIDERATION MOVING TO THE GOVERNMENT. 47 COMP. GEN. 732, 736 (1968).

ACCORDINGLY, WE FIND NO LEGAL BASIS TO GRANT THE RELIEF REQUESTED AND THE LESSOR IS OBLIGATED TO PERFORM UNDER THE LEASE ACCORDING TO ITS TERMS AS AWARDED BY THE GOVERNMENT.