B-195207, JUL 14, 1980

B-195207, JUL 14, 1980

DIGEST: 1. WHERE THERE APPEARS TO BE NO APPLICABLE STATE LAW INVOLVING CORRECTION OF BID, GRANTEE'S ACTIONS WILL BE REVIEWED ACCORDING TO BASIC PRINCIPLES OF COMPETITIVE BIDDING WHICH APPLY TO FEDERAL PROCUREMENTS. 2. CORRECTION OF MISTAKE IN BID, ALLEGED AFTER BID OPENING AND PRIOR TO AWARD, IS PROPER WHERE GRANTEE COULD REASONABLY CONCLUDE THAT BIDDER SHOWED BY CLEAR AND CONVINCING EVIDENCE EXISTENCE OF ERROR, HOW IT OCCURRED, AND INTENDED PRICE. HOWEVER, BECAUSE AMOUNT OF CORRECTION DOES NOT ACCURATELY REFLECT ACTUAL INTENDED BID, GAO RECOMMENDS THAT GRANTEE BE ADVISED THAT READJUSTMENT OF CONTRACT PRICE TO REFLECT PROPER CALCULATIONS WOULD BE APPROPRIATE.

WESTAM BUILDERS & ENGINEERS, INC.:

WESTAM BUILDERS & ENGINEERS, INC. (WESTAM) HAS REQUESTED THAT WE REVIEW A CONSTRUCTION CONTRACT AWARDED TO MARTIN J. JASKA, INC. (JASKA) BY THE ECONOMIC RESOURCES CORPORATION (ERC), LYNWOOD, CALIFORNIA, A PRIVATE NONPROFIT CORPORATION WHICH WAS AWARDED A GRANT BY THE ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) PURSUANT TO THE PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT OF 1965, AS AMENDED, 42 U.S.C. SECS. 3121-3246 (1976).

JASKA SUBMITTED THE LOW BID AT $809,000, BUT AFTER BID OPENING INFORMED ERC THAT IT HAD OMITTED COSTS TOTALING $36,787 FROM ITS BID. JASKA REQUESTED A $39,384 INCREASE TO INCLUDE THESE COSTS PLUS $2,597 FOR PROFIT, OVERHEAD, AND THE INCREASED BOND PREMIUM. INDIVIDUAL AMOUNTS FOR THESE THREE LATTER ITEMS ARE NOT INDICATED IN THE RECORD.

JASKA'S WORKSHEETS CONTAIN 13 CONSECUTIVE ITEMS TOTALING $35,287 WHICH WERE NOT INCLUDED IN THE BID. JASKA EXPLAINED THAT THESE ITEMS REPRESENTED SUPERVISORY SERVICES DIRECTLY PROVIDED BY JASKA, AND THAT JASKA SOLICITED SUBCONTRACT BIDS FOR THE REMAINING ITEMS. JASKA'S BID ESTIMATOR HAD TO ADJUST THE WORKSHEETS AS HE RECEIVED BIDS FROM POTENTIAL SUBCONTRACTORS; TO AVOID REPEATED ADDITION OF THE UNCHANGING SUPERVISORY COSTS, HE DREW A LINE UNDERNEATH THEM AND ENTERED THE SUBTOTAL (WHICH HE ERRONEOUSLY CALCULATED AS $36,787) TO THE LEFT OF THE COLUMN FOR THESE ITEMS. WHEN THE WORKSHEETS WERE TURNED OVER TO JASKA'S CONTROLLER FOR THE FINAL COMPUTATION OF THE BID, THE CONTROLLER ONLY ADDED THE SUBCONTRACTOR COSTS IN THE BASE BID COLUMN AND MISTOOK THE FIRST ITEM UNDER THE LINE AS BEING THE SUM OF THE 13 SUPERVISORY ITEMS ABOVE.

AFTER REVIEWING JASKA'S WORKSHEETS AND HEARING JASKA'S EXPLANATION OF HOW THE ALLEGED MISTAKE OCCURRED, ERC CONCLUDED THAT THE EVIDENCE SUFFICIENTLY ESTABLISHED THE EXISTENCE OF A MISTAKE AND PERMITTED THE REQUESTED CORRECTION. CONSEQUENTLY, WITH EDA'S CONCURRENCE, AWARD WAS MADE TO JASKA AT $848,384. THIS IS $46,197 LESS THAN WESTAM'S SECOND LOW BID.

JASKA ACKNOWLEDGES THAT THE SUPERVISORY ITEMS ONLY TOTAL $35,287 AS OPPOSED TO $36,787 (A DIFFERENCE OF $1,500), BUT CLAIMS THAT IN ADDING THE BASE BID LINE ITEMS THE CONTROLLER MADE ANOTHER ERROR WHICH MORE THAN OFFSETS THE AMOUNT CLAIMED. JASKA ALLEGES THAT THE CONTROLLER MISTAKENLY ADDED $500 FOR AN ITEM THAT WAS ENTERED AS $5,000 ON THE WORKSHEETS.

WESTAM COMPLAINS THAT ANY PRICE INCREASE AFTER BID OPENING IS INCONSISTENT WITH COMPETITIVE BIDDING REQUIREMENTS, AND ALSO QUESTIONS WHETHER JASKA SUFFICIENTLY ESTABLISHED THAT IT IN FACT MADE A MISTAKE. WESTAM ALSO SUGGESTS THAT EDA'S GRANT RULES AND REGULATIONS PRECLUDE AN UPWARD CORRECTION OF A LOW BID. WE ARE AWARE OF NO SUCH PROHIBITION.

THE GRANT AGREEMENT HERE STIPULATES, AMONG OTHER THINGS, THAT THE GRANTEE MUST COMPLY WITH ATTACHMENT O OF OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR A-110, WHICH STATES:

"ALL PROCUREMENT TRANSACTIONS SHALL BE CONDUCTED IN A MANNER TO PROVIDE, TO THE MAXIMUM EXTENT PRACTICAL, OPEN AND FREE COMPETITION."

WE HAVE CONSTRUED SUCH LANGUAGE AS REQUIRING THAT CERTAIN BASIC FEDERAL PRINCIPLES OF COMPETITIVE BIDDING, THE "FEDERAL NORM," MUST BE FOLLOWED. COPELAND SYSTEMS, INC., 55 COMP.GEN. 390, 393 (1975), 75-2 CPD 237. ALTHOUGH ATTACHMENT O PERMITS GRANTEES TO USE THEIR OWN PROCUREMENT PROCEDURES WHICH MUST BE CONSISTENT WITH STATE AND LOCAL LAW, IT IS APPARENT FROM THE RECORD THAT ERC HAS NO ESTABLISHED PROCEDURES DEALING WITH MISTAKES IN BIDS. MOREOVER, WE ARE NOT AWARE OF ANY CALIFORNIA LAW WHICH WOULD BE APPLICABLE TO THE CORRECTION OF BIDS IN A PROCUREMENT CONDUCTED BY A NON-GOVERNMENTAL, I.E., PRIVATE, ORGANIZATION SUCH AS ERC. WE THEREFORE WILL RELY UPON THE "FEDERAL NORM" FOR THE RESOLUTION OF THIS CASE. RAJ CONSTRUCTION, INC., B-191708, MARCH 1, 1979, 79-1 CPD 140.

IT IS NOT IMPROPER, UNDER THE PRINCIPLES INHERENT IN THE "FEDERAL NORM," TO ALLOW A BIDDER TO ADJUST ITS BID UPWARD AFTER BID OPENING BUT BEFORE AWARD. TO PROTECT THE INTEGRITY OF THE COMPETITIVE BID SYSTEM, HOWEVER, SUCH AN ADJUSTMENT IS PERMITTED ONLY WHERE THE BIDDER CAN SHOW BY CLEAR AND CONVINCING EVIDENCE THAT AN ERROR WAS MADE, THE MANNER IN WHICH IT OCCURRED, AND THE INTENDED PRICE. F. HODGSON & SONS, B-193531, MAY 16, 1979, 79-1 CPD 357; DEFENSE ACQUISITION REGULATION (DAR) SEC. 2-406.3(A)(2) (1976 ED.); FEDERAL PROCUREMENT REGULATIONS (FPR) SEC. 1-2.406-3(A)(2) (1964 ED.). THE BIDDER MUST ESTABLISH THE ACTUAL BID INTENDED BECAUSE IT WOULD OBVIOUSLY BE UNFAIR TO OTHER BIDDERS AND DETRIMENTAL TO THE INTEGRITY OF THE COMPETITIVE SYSTEM TO ALLOW THE BIDDER, AFTER OPENING, TO FIRST DETERMINE WHAT PRICE IT SHOULD HAVE SUBMITTED. WESTERN STATES CONSTRUCTION COMPANY, INC., B-191209, AUGUST 29, 1978, 78-2 CPD 149.

HOWEVER, A BIDDER IS NOT ALWAYS REQUIRED TO CLEARLY AND CONVINCINGLY ESTABLISH EXACTLY WHAT EACH ELEMENT OF HIS BID WOULD HAVE BEEN; CORRECTION MAY BE ALLOWED EVEN THOUGH THERE IS A NARROW RANGE OF UNCERTAINTY REGARDING SOME ASPECT OF THE BID, SUCH AS MARKUP THAT WAS ACTUALLY INTENDED. WESTERN STATE CONSTRUCTION COMPANY, INC., SUPRA. THIS DOES NOT MEAN A BIDDER IS FREE TO ELECT WHETHER TO REQUEST NO MARKUP OR A HIGH MARKUP DEPENDING UPON HOW THE REQUEST WILL AFFECT THE RELATIVE STANDING OF BIDDERS. CORRECTION OF A BID TO REFLECT ONLY OMITTED DIRECT COSTS (WITHOUT A CORRESPONDING INCREASE FOR PROFIT AND OVERHEAD) MAY BE PERMITTED ONLY IF IT IS CLEAR THE BID WOULD NONETHELESS REMAIN LOW IF A CORRESPONDING INCREASE IN PROFIT OR OVERHEAD WERE ALSO ADDED. WESTERN STATES CONSTRUCTION COMPANY, INC., SUPRA; 49 COMP.GEN. 480, 483 (1970). FOR THE PURPOSE OF THE CLEAR AND CONVINCING EVIDENCE STANDARD, WE ASSUME THAT A BIDDER'S MARKUP ON THE OMITTED ITEMS WOULD HAVE BEEN COMPUTED IN THE SAME WAY AS THE MARKUP ON THE ITEMS INCLUDED IN THE BID. CHRIS BERG, INC. V. UNITED STATES, 426 F.2D 314, 316 (CT.CL. 1970).

THE WEIGHT TO BE GIVEN EVIDENCE SUPPORTING AN ALLEGED MISTAKE IS A QUESTION OF FACT TO BE DECIDED BY THE PROCURING AGENCY (HERE THE GRANTEE), WHICH WILL NOT BE DISTURBED SO LONG AS IT IS REASONABLE. KINGS POINT MFG. CO., INC., B-193952, SEPTEMBER 14, 1979, 79-2 CPD 196.

IN THIS CASE, WE BELIEVE THAT ERC REASONABLY DETERMINED THE EXISTENCE OF A MISTAKE AND THE MANNER IN WHICH IT WAS MADE. JASKA'S WORKSHEETS CLEARLY SHOWED THE DIRECT COSTS AND THE SUBTOTAL (ALBEIT MISCALCULATED) OF THE SUPERVISORY ITEMS OMITTED FROM THE BASE BID. THESE WORKSHEETS AND THE BIDDER'S EXPLANATION ESTABLISHED THAT THE COSTS WERE OMITTED IN THE FINAL CALCULATION OF THE BASE BID. WE FURTHER BELIEVE THAT ERC COULD FIND THAT JASKA WAS ENTITLED TO BID CORRECTION SINCE JASKA'S CLEARLY SHOWED THAT ITS INTENDED BID INCLUDED THE OMITTED DIRECT COSTS AND PROFIT AND OVERHEAD THEREIN. WE DO NOT BELIEVE, HOWEVER, THAT THE AMOUNT OF THE UPWARD ADJUSTMENT WAS APPROPRIATE, SINCE THE ADJUSTMENT DID NOT REFLECT THE ACTUAL INTENDED DIRECT COSTS.

AS INDICATED BY THE WORKSHEETS, JASKA INTENDED TO INCLUDE IN ITS BID COSTS OF $35,287, AND NOT THE MISTAKEN SUBTOTAL OF $36,787. IN THIS REGARD, JASKA MAY NOT SETOFF THE DIFFERENCE AGAINST THE ALLEGED MISTAKE OF $4,500 MADE BY ITS CONTROLLER BECAUSE JASKA DID NOT RAISE THIS MISTAKE UNTIL AFTER AWARD. IT IS A FUNDAMENTAL PRINCIPLE OF COMPETITIVE BIDDING THAT RELIEF MAY BE GRANTED FOR A UNILATERAL MISTAKE ALLEGED AFTER AWARD ONLY IF THE CONTRACTING OFFICER HAD EITHER ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF THE MISTAKE PRIOR TO AWARD, SEE JOHN W. LOGAN, B-196494, DECEMBER 26, 1979, 79-2 CPD 434; DAR SEC. 2.406.4(B); FPR SEC. 2.406-4(C), OR IF THE CONTRACTOR ACCEPTED THE AWARD RESERVING THE RIGHT TO OBTAIN CORRECTION FOR THE ALLEGED MISTAKE. CONTRA COSTA ELECTRIC, INC. - RECONSIDERATION; CARL W. OLSON AND SONS CO., B-192752, AUGUST 6, 1979, 79-2 CPD 79. SINCE THERE IS NO EVIDENCE THAT ERC HAD SUCH KNOWLEDGE OF THIS ERROR, OR THAT JASKA RESERVED THE RIGHT TO RAISE THE MISTAKE AFTER AWARD, THE MISTAKE ALLEGED AFTER AWARD CANNOT BE CONSIDERED.

AS THE CORRECT FIGURE FOR OMITTED COSTS IS $35,287, ANY CORRECTION MUST BE BASED ON THAT FIGURE. SEE AAA ENGINEERING & DRAFTING, INC., B-191658, JUNE 23, 1978, 78-1 CPD 460. THE WORKSHEETS SHOW THAT JASKA ADDED $50,000 FOR PROFIT AND OVERHEAD TO ITS TOTAL DIRECT COSTS OF $759,000 IN THE ORIGINAL BID. APPLYING THE SAME RATE OF MARKUP TO THE $35,287 OF OMITTED COSTS, THE INCREASED PROFIT AND OVERHEAD SHOULD BE $2,325, FOR A TOTAL OF $37,612. THE $50,000 WORKSHEET FIGURE FOR MARKUP MIGHT BE A ROUNDED FIGURE BASED ON A PERCENTAGE MARKUP OR AN AMOUNT JASKA INTUITIVELY REGARDED AS BEING COMPETITIVE. THIS UNCERTAINTY RAISES SOME QUESTION AS TO WHAT EXTENT THE BIDDER WOULD HAVE RELIED UPON THE OMITTED COSTS TO MODIFY ITS MARKUP. HOWEVER IN CHRIS BERG, INC., SUPRA, THE COURT HELD THAT SUCH UNCERTAINTY DOES NOT PRECLUDE THE REFORMATION OF A CONTRACT TO CORRECT A MISTAKE IN BID (INCLUDING MARKUP), AND EXPLAINED:

"ONE MUST BE WILLING TO BELIEVE THE EVIDENCE IS 'CLEAR AND CONVINCING' ON THE BASIS OF A REASONABLE PROBABILITY THAT THE MARKUP ON THE HIGHER COSTS WOULD BE COMPUTED IN THE SAME WAY IT WAS ON THE MISTAKEN LOWER ONES."

ALTHOUGH JASKA REQUESTED CORRECTION TO REFLECT INCREASED BONDING EXPENSES, THE WORKSHEETS DO NOT SHOW WHETHER OR NOT FIXED PERCENTAGES WERE USED IN CALCULATING THE AMOUNT OF BOND PREMIUM, AND THERE IS NO OTHER EVIDENCE OF RECORD CONCERNING WHAT THE BOND PREMIUM SHOULD HAVE BEEN. CONSEQUENTLY, WE CANNOT DETERMINE WITH CERTAINTY WHAT THIS ASPECT OF THE INTENDED BID WOULD HAVE BEEN ABSENT THE MISTAKE. SEE 51 COMP.GEN. 503, 506 (1972).

WE ARE RECOMMENDING THAT GRANTOR AGENCY ADVISE THE GRANTEE THAT ADJUSTMENT OF THE JASKA CONTRACT TO REFLECT THE CORRECT CALCULATIONS WOULD BE APPROPRIATE.

THE COMPLAINT IS DENIED.