B-130964, MAR. 20, 1957

B-130964, MAR. 20, 1957

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER DATED MARCH 4, 1957, WITH ENCLOSURES, FROM CAPTAIN D. C. MACKENZIE, ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN CONCERNING AN ERROR WHICH CONTINENTAL ELECTRONICS, LTD., BROOKLYN, NEW YORK, ALLEGES IT MADE IN ITS BID ON WHICH CONTRACT NO. N102-64920, WAS AWARDED.

THE SUPPLY DEPARTMENT, PORTSMOUTH NAVAL SHIPYARD, PORTSMOUTH, NEW HAMPSHIRE, BY INVITATION IFB-102-88-57PR, REQUESTED BIDS FOR FURNISHING SPECIFIED QUANTITIES OF HANDSET HOLDERS AND SPRINGS, WHICH WERE TO BE MANUFACTURED IN ACCORDANCE WITH CERTAIN GOVERNMENT SPECIFICATIONS AND DRAWINGS.

THE RECORD SHOWS THAT FOUR BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION AS FOLLOWS:

CHART BIDDER ITEM 1 ITEM 2 ITEM 3 TOTAL - ---- ------ ------ ------ -----

3000 EA. 1000 EA. 10,000 EA. CONTINENTAL ELECTRONICS,

LTD. $ 6.35 $ 9.10 $ .30 $31,150. GRAYBAR ELECTRIC CO. 10.35 6.45 1.45 52,000. DAY-O-LITE MFG. CO. 10.75 7.83 1.34 53,480. PORTSMOUTH METAL FABRICATORS NO BID NO BID 1.3975 13,975.

IT IS REPORTED THAT THE BID OF THE GRAYBAR ELECTRIC COMPANY WAS CONSIDERED AS NON-RESPONSIVE BECAUSE THIS WAS A SMALL BUSINESS RESTRICTED PROCUREMENT; AND THAT THE GOVERNMENT'S ESTIMATE WAS $8 EACH FOR ITEMS 1 AND 2, AND $1.90 EACH FOR ITEM 3.

UPON BEING REQUESTED TO VERIFY ITS UNITE PRICES ON ITEMS 2 AND 3, CONTINENTAL ELECTRONICS, TD., ADVISED BY LETTER DATED SEPTEMBER 5, 1956, THAT THE TOOLING FOR ITEMS 1 AND 2 WAS THE SAME AND THEREFORE IT WAS ASSUMED THAT THESE ITEMS WOULD BE AWARDED TO ONE BIDDER; ALSO, IT CONFIRMED ITS PRICE ON ITEM 2. AS TO ITEM 3, IT ADVISED FURTHER THAT THE UNIT PRICE OF ?30 EACH SHOULD HAVE BEEN $1.30, BUT NOTWITHSTANDING THIS ERROR IT WOULD ACCEPT AN ORDER FOR ALL THREE ITEMS BUT NOT FOR ITEM 3 ONLY.

IN HIS UNDATED REPORT THE CONTRACTING OFFICER STATES THAT ON SEPTEMBER 11, 1956, CONTINENTAL ELECTRONICS, LTD., WAS REQUESTED TO AND DID, BY TELEPHONE, CONFIRM ITS UNIT PRICE ON ITEM 1; AND THAT SINCE THE COMPANY HAD CONFIRMED ALL OF ITS BID PRICES AND BECAUSE ITS BID WAS THE MOST ADVANTAGEOUS TO THE GOVERNMENT, CONTRACT NO. N102 64920 WAS AWARDED TO THE COMPANY ON OCTOBER 16, 1956.

BY LETTER FATED JANUARY 4, 1957, CONTINENTAL ELECTRONICS, LTD., ADVISED AS FOLLOWS:

"IN ACCORDANCE WITH OUR TELEPHONE CONVERSATION OF THIS DATE, AND PER YOUR REQUEST, WE WISH TO BRIEFLY SET FORTH OUR PROBLEM ARISING FROM A PRICING ERROR WHICH WE MADE.

"WE WOULD APPRECIATE YOUR GIVING CONSIDERATION TO THE FOLLOWING FACTS OF THE CASE AND RELEASING US FROM THIS CONTRACT AT NO COST TO THE GOVERNMENT:

"1. WE RECEIVED AN AWARD FOR ITEMS 1, 2 AND 3 FOR A TOTAL OF $31,150.00. THIS AMOUNT INCLUDED ALL TOOLING NECESSARY TO PRODUCE THESE PARTS.

"2. THERE ARE ONLY THREE COMPANIES THAT OWN TOOLS AT THE PRESENT TIME TO PRODUCE THIS JOB. EVEN THOUGH THESE FIRMS ALREADY OWN THE TOOLING, THEIR BIDS FOR THE SAME ITEMS WERE:

CHART

GRAYBAR ELECTRIC CO. $52,000.00

DAY-O-LITE MANUFACTURING CO. 53,480.00

THE SPERTI FARRADAY CO., ALTHOUGH NOT BIDDING DIRECTLY ON THIS PROCUREMENT WOULD CHARGE $56,700.00 FOR THE SAME ITEMS.

"3. OUR ERROR STEMMED FROM THE FACT THAT WE HAD ASSUMED IN OUR PRICES FROM THE TOOL AND DIE MAKERS THAT MATERIALS WERE INCLUDED. AS IT TURNED OUT, THE COST OF MATERIALS AMOUNTING TO APPROX. $21,300.00 WERE NOT INCLUDED IN THE ORIGINAL ESTIMATES.

"5. AS A CONCRETE EXAMPLE OF OUR ERROR IN THE OMISSION OF MATERIALS COST, WE WISH FOR YOU TO CONSIDER ITEM 3 WHEREIN WE BID $0.30 EACH. THE MATERIAL FOR THIS ITEM IS BERYLLIUM COPPER. WE CONTACTED EVERY FIRM IN THE ENTIRE EASTERN AREA OF THE UNITED STATES THAT SUPPLIES THIS MATERIAL. THE PRICES RANGE FROM $2.17 PER POUND THROUGH $2.49 PER POUND. EACH PIECE REQUIRES APPROX. 3 OUNCES OF BERYLLIUM COPPER. FIGURED ON THE MINIMUM BASIS OF $2.17 PER POUND, THIS AMOUNTS TO APPROXIMATELY $0.40 FOR BASIC RAW MATERIAL NOT INCLUDING TOOLING, LABOR, OR FABRICATION OF ANY TYPE. OTHER WORDS, THE $0.30 WHICH WE FIGURED COVERED THE LABOR AND TOOLING, BUT OMITTED THE RAW MATERIAL COST. THUS, IT IS OBVIOUS THAT WE WERE MISINFORMED BY OUR SUB CONTRACTOR, AND WE IN TURN ERRONEOUSLY TOOK THE RESPONSIBILITY FOR THIS BLUNDER.'

BY LETTER DATED JANUARY 29, 1957, THE COMPANY SUBMITTED COPIES OF QUOTATIONS RECEIVED BY IT FOR FURNISHING BERYLLIUM COPPER STRIPS, AND A COPY OF A CONFIRMING QUOTATION DATED NOVEMBER 8, 1956, RECEIVED FROM ITS SUBCONTRACTOR, ERCA TOOL DIE AND STAMPING CO., BROOKLYN, NEW YORK, IN WHICH IT WAS INDICATED THAT THE TOTAL TOOLING AND STAMPING CHARGES WOULD AMOUNT TO $26,320. ALSO, THE COMPANY SUBMITTED ESTIMATE SHEETS COVERING BASIC RAW MATERIALS COSTING $15,685 AND COVERING ADDITIONAL WORK TO BE PERFORMED BY THE COMPANY WHICH, IT STATED, WOULD COST $4,620. IN ITS LETTER THE COMPANY STATED THAT ITS FINAL DIRECT COSTS WOULD AMOUNT TO $46,625 AND THAT IF ESTIMATED AMOUNTS TO COVER THE ITEMS OF "FREIGHT-IN, FREIGHT-OUT, PACKAGING AND PACKING, BURDEN, G AND A, ENGINEERING, OR PROFIT" WERE ADDED TO THIS AMOUNT, THE TOTAL COST FOR THE HOLDERS AND SPRINGS WOULD BE APPROXIMATELY $56,000.

THE RECORD INDICATES THAT CONTINENTAL ELECTRONICS, LTD., QUOTED AN AGGREGATE BID PRICE OF $31,150 FOR ITEMS 1 TO 3, INCLUSIVE, AND THAT TWO OTHER BIDDERS' AGGREGATE BID PRICES WERE $52,000 AND $53,480 FOR THOSE ITEMS. THUS, THE DIFFERENCE BETWEEN THE COMPANY'S AGGREGATE BID PRICE AND THE AGGREGATE BID PRICES QUOTED BY THE OTHER BIDDERS IS MORE THAN $20,000, AND IN HIS REPORT, THE CONTRACTING OFFICER STATES THAT SUCH SUBSTANTIAL DIFFERENCE IN BIDS SHOULD HAVE BEEN BROUGHT TO THE SPECIFIC ATTENTION OF CONTINENTAL ELECTRONICS, LTD., WHO, IT APPEARS, DID NOT OWN, AT THE TIME OF THE SUBMISSION OF ITS BID, THE TOOLS NECESSARY FOR THE MANUFACTURE OF THE REQUIRED PARTS. THIS OPINION IS SUPPORTED BY THE FACT THAT THE RECORD INDICATES THAT THE OTHER BIDDERS OWNED THE TOOLS NECESSARY FOR THE MANUFACTURE OF THE REQUIRED PARTS. IN THE PRESENT CASE THE LOW BIDDER IS NOT SEEKING A REFORMATION OF ITS BID PRICE SO AS TO GAIN ANY UNFAIR ADVANTAGE OVER THE OTHER BIDDERS CONCERNED, (SEE INTERNATIONAL HARVESTER COMPANY V. MISSISSIPPI LAND COMPANY, 43 F.2D 17; AND OLYMPIA SHIPPING CORPORATION V. UNITED STATES, 71 C.CLS. 251) BUT MERELY IS REQUESTING THAT IT BE RELIEVED OF AN OBLIGATION UNDER ITS INCORRECT BID WITHOUT AFFECTING, IN ANY MANNER, THE RIGHTS OF THE OTHER BIDDERS UNDER THE PRESENT INVITATION. SINCE THE CONTRACTING OFFICER, AT THE TIME OF THE AWARD, HAD KNOWLEDGE OF A $10,000 ERROR IN THE COMPANY'S BID ON ITEM 3--- MISTAKE OF $1 ON 10,000 UNITS--- AND SINCE THE AMOUNT OF ITS BID WAS APPROXIMATELY 60 PERCENT OF THE AMOUNTS QUOTED BY THE OTHER BIDDERS, THE GOVERNMENT SHOULD NOT INSIST THAT THE COMPANY FURNISH THE SUPPLIES AT ITS BID PRICES.

ACCORDINGLY, THE CONTRACT MAY BE CANCELLED WITHOUT LIABILITY TO EITHER PARTY.