Matter of: M. A. Mortenson Company File: B-254152 Date: November 19, 1993 REDACTED VERSION[*]
B-254152: Nov 19, 1993
The bid is low with or without correction. Bidders were instructed to submit only a single lump-sum bid price. Fourteen bids were received and opened on the May 13 bid opening date. PK was the apparent low bidder at $6. While Mortenson was next low at $6. The contracting officer requested PK to review and confirm its bid because it was significantly lower than the other bids received and the government estimate ($9. The contracting officer still was not convinced that PK's stated price was accurate. The amount should have been 347. Containing calculations showing how the fill material calculations were performed. On July 15 award was made to PK at this corrected price. Which was denied.
Matter of: M. A. Mortenson Company File: B-254152 Date: November 19, 1993 REDACTED VERSION[*]
PROCUREMENT Sealed Bidding Bids Post-bid opening periods Error correction Propriety Where agency reasonably concluded that the awardee presented clear and convincing evidence of a mistake in its bid and the intended bid price, and the bid is low with or without correction, agency properly made award at corrected price.
We deny the protest.
The IFB, issued on April 12, 1993, contemplated the award of a firm-fixed-price contract for all labor, materials, and equipment needed for the construction projects at the Navy Community Support Complex, Everett, Washington. Although the IFB's specifications contained several divisions of work, bidders were instructed to submit only a single lump-sum bid price.
Fourteen bids were received and opened on the May 13 bid opening date. PK was the apparent low bidder at $6,248,579, while Mortenson was next low at $6,994,000. By letter of May 17, the contracting officer requested PK to review and confirm its bid because it was significantly lower than the other bids received and the government estimate ($9,900,000). On May 18, PK provided to the contracting officer written confirmation of its bid price and, as support for its price, a detailed breakdown of the prices for the various divisions of work listed in the IFB. After reviewing the price breakdowns, the contracting officer asked PK to submit additional information, including a breakdown of its price for the work in the IFB entitled "Earthwork for Structures and Pavements," regarding the amount of imported fill dirt needed for the contract and the "installed cost per yard" for the fill.
By letter of May 21, PK reconfirmed its original bid price. The contracting officer still was not convinced that PK's stated price was accurate, however, and thus held a bid verification meeting with PK on May 21 and requested the firm to again review its bid and submit additional information regarding its stated bid price. Thereafter, in a May 25 letter, PK alleged for the first time that it had made a mistake in its bid and requested permission to correct it. Specifically, PK stated that four mathematical errors during its bid preparation had caused an underestimate of the total quantity of fill needed for the contract; instead of 300,000 cubic yards (cy), the amount should have been 347,000 cy. This underestimate, in turn, resulted in understated material, fill placement (i.e., primarily labor and equipment), bond and insurance, and profit figures. In support of its claim, PK submitted an affidavit from a PK employee confirming the four mathematical errors, various worksheets, and a set of handwritten "take-off" sheets, dated May 12, containing calculations showing how the fill material calculations were performed.
The contracting officer ultimately determined that, even with the claimed mistake corrected, there remained several unexplained understated prices for various segments of the work; he concluded that these problems precluded correction of the bid. However, the head of the contracting activity (HCA) disagreed with the contracting officer. By memorandum dated July 12, he determined that PK had presented clear and convincing evidence of both the existence of the fill material (and related) mistakes and of the intended bid. In fact, in reviewing PK's bid, the HCA discovered another mathematical error (similar to the other four) in the fill material computation, although he agreed with the 347,000 cy total as the amount PK intended to use in preparing its bid. The HCA then recalculated PK's bid items affected by the fill material mistake, and arrived at a total mistake amount of $453,856; he added this amount to PK's original bid price of $6,248,579 to reach a total corrected bid price of $6,702,435. On July 14, PK sent a letter to the Navy agreeing to the Navy's determination, and on July 15 award was made to PK at this corrected price. Mortenson filed an agency-level protest, which was denied. This protest followed.
Mortenson maintains that the Navy improperly permitted PK to correct the mistake in its bid, arguing that PK did not present sufficient evidence of the bid actually intended.
An agency may permit correction of a bid where clear and convincing evidence establishes both the existence of a mistake and the bid actually intended. Federal Acquisition Regulation (FAR) Sec. 14.603-3(a); International Serv. Corp., B-246159, Feb. 14, 1992, 92-1 CPD Para. 191. In considering upward correction of a low bid, worksheets may constitute clear and convincing evidence if they are in good order and indicate the intended bid price and there is no contravening evidence. Lash Corp., 68 Comp.Gen. 232 (1989), 89-1 CPD Para. 120. Further, where a mistake has a specifically calculable effect on the bid calculation and that effect can be determined by a formula evident from the worksheets, the intended bid may be ascertained by taking into account the effects of the error on other bid calculations based on the mistaken entry. Amtech Elevator Servs., B-216067, Jan. 11, 1985, 85-1 CPD Para. 31. Whether the evidence meets the clear and convincing standard is a question of fact, and we will not question an agency's decision based on this evidence unless it lacks a reasonable basis. Vrooman Constructors, Inc., B-226965.2, June 17, 1987, 87-1 CPD Para. 606.
We conclude that the agency reasonably permitted correction here. The most significant evidence in the record is the set of handwritten take-off sheets dated May 12 (i.e., prior to bid opening), which show that the calculations for four of the eight subareas into which PK divided the fill requirement were in fact incorrect. Those cy calculations are as follows:
Area Calculation Bid Correct Difference
3 (170 x 565 x 6.7)/27 = 12,467 23,834 11,367 4 (345 x 575 x 7.2)/27 = 25,300 52,900 27,600 5 (109 x 587 x 2.5)/27 = 2,253 5,977 3,724 6 (100 x 240 x 4.8)/27 = 2,074 4,266 2,192
Subtotal: = 42,094 86,977 44,883
Adding the 44,883 cy to PK's original calculation yields a corrected quantity of 344,883 cy. PK's worksheets show it added a [deleted] waste factor to its original fill material calculation ([deleted] x 286,400 cy) and then rounded this to 300,000 cy; adding the same factor to the correction ([deleted] x 44,883) increases the fill amount (with rounding) to the 347,000 cy figure PK claimed it intended. Given the clear evidence of the mistake in the take-off sheets, and the absence of any other inconsistencies or contravening evidence, there is no basis for questioning the agency's conclusion that PK understated the total fill amount used in preparing its bid by 47,000 cy.
The material, fill placement, bond and insurance, and profit figures can be readily recalculated using the corrected fill amount and the worksheet and take-off sheet figures. First, PK's worksheets show it originally determined the cost of fill placement by multiplying the fill amount by a factor of [deleted]. Due to economies of scale, after PK increased its fill placement costs (e.g., equipment, fuel, etc.) to account for the longer time (14 days) needed to place the greater amount of fill, the cost per cy of fill actually fell to [deleted]. Calculating the fill placement cost using the added quantity of fill thus yields a price increase of [deleted] for this item. PK determined its material price (i.e., for the fill itself) by multiplying the total cy of fill by a factor of [deleted]. Performing this calculation on the additional fill amount results in a price increase of $364,494.40. The documentation presented to the agency therefore showed that the understated fill amount resulted in an understatement in PK's bid of $415,254. Applying PK's [deleted] profit and [deleted] bond and insurance cost figures to this amount (the allowances for these items are based upon mathematical formulas contained in PK's worksheets) results in the corrected bid price of $6,702,435. We conclude that the mistake and the intended bid were evident from the worksheets and other documentation provided by PK, and that the agency therefore reasonably permitted the upward correction in PK's bid.
Mortenson argues that there is evidence in the documents presented by PK--e.g., omitted or understated (compared to the government estimate) prices for certain work--of other possible mistakes in PK's bid, and that the Navy essentially permitted PK to pick and choose mistakes for which it would seek correction based on whether its bid would remain low.
There is no evidence of additional mistakes in PK's bid. First, the absence of prices for certain work from PK's worksheets appears to be due at least in part to the fact that PK did not track the IFB work divisions in preparing its bid; rather, PK used different descriptive labels for the work categories. Although during the bid verification process PK did furnish the agency with a price breakdown based on the IFB work divisions, since this breakdown did not reflect the manner in which PK put its bid together, we think it is understandable that it would contain some apparent pricing discrepancies. Further, we fail to see how Mortenson can suggest that the fact that prices for certain of PK's bid elements may appear lower than the government estimate evidences a possible mistake, in light of Mortenson's own bid ($6.994 million), which itself was approximately $3 million below the estimate ($9.9 million). More fundamentally, given that a bidder's pricing of the different elements of its bid is dependent upon the bidder's particular business circumstances, judgement, and bidding strategy, there is no basis for assuming that omitted or understated prices reflect a mistake. Rather, where there is nothing in the worksheets or elsewhere in the record suggesting that a price was omitted or understated due to a mistake (rather than, for example, a bidding strategy), we will not question the agency's judgement that there were no further mistakes.
Mortenson raises numerous additional arguments that we conclude are without merit. For example, Mortenson argues that PK's correction claim is undermined by PK's failure to include in its bid increased field overhead expenses and administrative costs that would necessarily result from the additional 14 days of performance necessitated by the 47,000 cy increase in fill material. Although PK's worksheets do not show whether these costs were added (and, as discussed above, we will not assume that their omission reflects a mistake), it is clear that the potential effect would be minimal (only approximately [deleted]), and would not affect our conclusion that correction was proper. See McInnis Bros. Constr., Inc., B-251138, Mar. 1, 1993, 93-1 CPD Para. 186 (where there is clear and convincing evidence that intended bid falls within narrow range of uncertainty and would remain low under any interpretation, correction is proper). Mortenson also argues that PK's intended bid price is uncertain, since PK stated in its May 21 bid verification letter that its original bid price was based on "300,000 cubic yards (truck measure)" of fill material, while its worksheets show 300,000 cubic "bank yards," approximately 20 percent less. However, PK has stated that the term "truck measure" in its May 21 letter was a typographical error, and PK's worksheets are sufficient to confirm that PK's intent was to base its calculations on bank yards.
The protest is denied.
* The decision issued on November 19, 1993, contained proprietary information and was subject to a General Accounting Office protective order. This version of the decision has been redacted. Deletions in text are indicated by "[deleted]."
1. The HCA found an additional mathematical error in area 6 on PK's original take-off sheet: (100 x 160 x 3.5)/27 = 2,223 cy. The correct amount for this calculation was 2,074 cy, 149 cy lower than PK calculated. Due to rounding, this small mistake did not change the 347,000 cy total.
2. PK's correction of its multiplication for this area actually remains incorrect; the correct amount is 5,924 cy rather than 5,977 cy. The difference of 53 cy, however, makes no difference in the 347,000 due to rounding.
3. The total of [deleted] for overhead expenses and administrative costs divided by 11 months over which PK spread these costs yields [deleted] per month for overhead expenses and administrative costs; 2 additional weeks thus would increase these costs by approximately [deleted].
4."Bank yards" of fill material (or "in place" cy) is the amount of fill removed from the ground, while "truck measure" cy is the amount of fill removed, increased by the percentage of swell that results when the material is compacted in the truck.