B-126669, JAN. 26, 1956

B-126669, JAN. 26, 1956

TO THE HONORABLE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED JANUARY 16, 1956, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL), RELATIVE TO AN ERROR ALLEGED BY THE WALTER METALS COMPANY, COMPTON, CALIFORNIA, TO HAVE BEEN MADE IN ITS UNDATED BID, ON WHICH CONTRACT NO. N189S-16581-A/S), IS BASED.

BY INVITATION NO. B-65-56 THE NAVAL SUPPLY CENTER, DISPOSAL DEPARTMENT, NORFOLK, VIRGINIA, REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF SURPLUS MATERIAL LOCATED AT VARIOUS NAVAL SUPPLY DEPOTS. THE INVITATION SPECIFIED THAT BIDS WOULD BE OPENED NOVEMBER 15, 1955, AND THAT EACH BID SHOULD BE ACCOMPANIED WITH A DEPOSIT OF 20 PERCENT OF THE TOTAL AMOUNT BID. IN RESPONSE TO THE INVITATION THE WALTER METALS COMPANY SUBMITTED A BID OFFERING TO PURCHASE, AMONG OTHERS, LOT 5497, A NORTHWEST CRAWLER CRANE, 20 TO 30 TON CAPACITY, MODEL 6, YEAR UNKNOWN, USN 178019 WITH 55 FOOT BOOM, NO PARTS MISSING, LOCATED AT THE NAVAL AIR FACILITY, WEEKSVILLE, ELIZABETH CITY, NORTH CAROLINA, AT A PRICE OF $8,889.99. THE NEXT HIGHEST BID BY W. H. SCOTT OF FRANKLIN, VIRGINIA, WAS IN THE AMOUNT OF $7,600 AND THE FIFTEEN OTHER BIDS RECEIVED RANGED FROM $3,989 TO $508.88. THE HIGH BID OF THE WALTER METALS COMPANY WAS ACCEPTED BY THE DISPOSAL OFFICER AND DESIGNATED CONTRACT N-189S-16581-A/S). THE BID WAS ACCOMPANIED BY A DEPOSIT OF $11,710.

BY LETTER DATED DECEMBER 21, 1955, THE COMPANY ALLEGED ERROR, CLAIMING THAT ITS BID WAS BASED ON ITS OPINION THAT THE CRANE WAS A DIESEL POWERED MACHINE WHEREAS IT TURNED OUT TO BE POWERED BY A GASOLINE ENGINE. IT WAS FURTHER STATED THAT A VISUAL INSPECTION BY A THIRD PARTY AT ITS REQUEST RESULTED IN A REPORT TO THE COMPANY THAT THE MACHINE WAS POWERED BY A DIESEL ENGINE. IT WAS FURTHER STATED THAT AFTER AWARD, WHEN THE BIDDER TELEPHONED THE HOLDING ACTIVITY FOR ADDITIONAL INFORMATION, THEY WERE INFORMED BY NAVAL PERSONNEL THAT THE CRANE WAS DIESEL POWERED. DECEMBER 12, 1955, THE COMPANY MADE A PERSONAL INSPECTION AND FOUND THAT WHILE THE MACHINE HAD THE OUTWARD FEATURES OF A DIESEL ENGINE THAT IT WAS POWERED BY A GASOLINE ENGINE. ON THE SAME DAY A COMPANY REPRESENTATIVE TELEPHONED THE SECOND HIGHEST BIDDER WITH THE INTENTION OF SELLING THE CRANE, BUT WHEN THE SECOND HIGHEST BIDDER WAS TOLD THAT THE CRANE HAD A GASOLINE ENGINE THEY STATED THAT THEY HAD INSPECTED THE MACHINE AND BELIEVED IT TO BE DIESEL POWERED BUT THAT IF IT HAD KNOWN THAT IT WAS GASOLINE POWERED THEY WOULD NOT HAVE BID ON THE MACHINE AT ANY PRICE.

IN HIS REPORT OF DECEMBER 28, 1955, RECOMMENDING THAT THE DEPOSIT OF $11,710 BE REFUNDED TO THE WALTER METALS COMPANY, THE CONTRACTING OFFICER STATES THAT WHILE THE YEAR OF THE CRANE IS SHOWN AS "UNKNOWN" ON THE SALES INVITATION, THE CLAIMANT HAS ASCERTAINED FROM THE MANUFACTURER THAT THE SERIAL NUMBER 6362 INDICATES THE EQUIPMENT TO HAVE BEEN MANUFACTURED IN 1940. ALSO, IT IS REPORTED THAT THE GOVERNMENT'S ACQUISITION COST ON THIS UNIT WAS $9,000, AND THAT SINCE THE BID PRICE OF $8,889.99 IS ALMOST 100 PERCENT OF THE ACQUISITION COST OF A FIFTEEN YEAR OLD CRANE, THAT THE ACTUAL RETURN ON A GASOLINE DRIVEN CRANE OF FIFTEEN YEARS SHOULD NOT HAVE EXCEEDED 50 PERCENT OF THE ORIGINAL COST. THUS, THE BIDS OF THE CONTRACTOR AND THE SECOND HIGHEST BIDDER ON THE CRANE WERE ENTIRELY OUT OF LINE WITH THE OTHER BIDS RECEIVED AND WHILE A MERE DIFFERENCE IN THE PRICES QUOTED FOR USED GOVERNMENT PROPERTY WOULD NOT NECESSARILY PLACE THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR AS WOULD A LIKE DIFFERENCE IN THE PRICES QUOTED ON NEW PROPERTY FOR SALE TO THE GOVERNMENT, IT MUST BE CONCEDED THAT IT IS UNLIKELY THAT A BIDDER, AS HERE, INTENTIONALLY WOULD OFFER FOR USED PROPERTY ALMOST 100 PERCENT OF THE ACQUISITION COST OF THE CRANE. THE CONTRACTING OFFICER ALSO STATES IN HIS REPORT THAT HE IS OF THE OPINION THAT AN HONEST ERROR WAS MADE NOT ONLY BY THE CLAIMANT, WHO BASED HIS OFFER ON THE VISUAL INSPECTION OF A THIRD PARTY, BUT ALSO BY NAVAL PERSONNEL AT THE HOLDING ACTIVITY AND BY THE SECOND HIGH BIDDER AS WELL.

ALTHOUGH THE RESPONSIBILITY FOR THE PREPARATION OF THE BID SUBMITTED WAS UPON THE WALTER METALS COMPANY, NEVERTHELESS, THE FACTS AND CIRCUMSTANCES SET FORTH ABOVE APPEAR TO HAVE BEEN SUFFICIENT TO HAVE PLACED THE CONTRACTING OFFICER ON NOTICE OF PROBABILITY OF ERROR IN THE BID OF THE COMPANY AS WELL AS THE SECOND HIGH BIDDER; HENCE, THE BID OF WALTER METALS COMPANY SHOULD NOT HAVE BEEN ACCEPTED WITHOUT REQUESTING THE COMPANY TO VERIFY ITS BID.

ACCORDINGLY, THE CONTRACT SHOULD BE CANCELED AND THE BID DEPOSIT OF $11,710 SHOULD BE REFUNDED.

THE PAPERS, WITH THE EXCEPTION OF THE CONTRACTOR'S LETTER OF DECEMBER 21, 1955, AND THE CONTRACTING OFFICER'S STATEMENT DATED DECEMBER 28, 1955, ARE RETURNED.