B-134201, DEC. 20, 1957

B-134201, DEC. 20, 1957

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 25, 1957, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, FURNISHING THE REPORT REQUESTED BY OUR OFFICE RELATIVE TO THE REQUEST OF THE DIAMOND PARLOR FURNITURE CO., INC., BOSTON, MASSACHUSETTS, FOR RELIEF FROM ITS CONTRACT NO. N600/342/46396.

THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., BY INVITATION NO. IFB-600 300-58 REQUESTED BIDS TO BE OPENED SEPTEMBER 28, 1957, FOR FURNISHING 100 DAVENPORTS, 200 EASY ARM CHAIRS, AND 200 OCCASIONAL ARM CHAIRS, TO BE MANUFACTURED IN ACCORDANCE WITH THE GOVERNMENT'S SPECIFICATIONS AND TO BE DELIVERED NO LATER THAN DECEMBER 31, 1957. PROSPECTIVE BIDDERS WERE ADVISED ON PAGE 2 OF THE INVITATION THAT IDENTICAL QUANTITIES OF THE SAME TYPE OF FURNITURE HAD BEEN SET ASIDE FOR NEGOTIATION WITH SMALL BUSINESS CONCERNS EXCLUSIVELY. IN RESPONSE TO THE INVITATION, THE DIAMOND PARLOR FURNITURE CO., INC., SUBMITTED A BID DATED SEPTEMBER 20, 1957, SIGNED BY HERBERT M. STEIN, VICE-PRESIDENT, OFFERING TO FURNISH THE FURNITURE AT THE UNIT PRICES SPECIFIED MAKING A TOTAL AGGREGATE BID PRICE OF $42,370. THE ABSTRACT OF BIDS SHOWS THAT FOUR OTHER RESPONSIVE BIDDERS QUOTED TOTAL AGGREGATE BID PRICES OF $45,800, $46,750, $51,390, AND $66,022. THE CONTRACTING OFFICER REPORTS THAT SINCE THE DIAMOND PARLOR FURNITURE CO., INC., WAS RELATIVELY UNKNOWN AS TO CAPACITY AND CREDIT, HE REQUESTED THE INSPECTOR OF NAVAL MATERIAL, BOSTON, MASSACHUSETTS, TO CONDUCT A PRE AWARD SURVEY OF THE CORPORATION'S ABILITY TO PERFORM THE CONTRACT AND THAT THE INSPECTOR RENDERED A FAVORABLE REPORT.

IN A LETTER DATED OCTOBER 3, 1957, WHICH WE ARE ADVISED INFORMALLY WAS HANDED PERSONALLY TO MR. SOL C. BENNETT, THE CORPORATION'S WASHINGTON, D.C., REPRESENTATIVE, THE NAVY PURCHASING OFFICE INFORMED THE CORPORATION THAT IT WAS IN LINE FOR AWARD AND REQUESTED ADVICE AS TO WHETHER IT DESIRED TO SUPPLY THE ADDITIONAL QUANTITY OF FURNITURE THAT HAD BEEN SET ASIDE FOR NEGOTIATIONS WITH SMALL BUSINESS CONCERNS. BY LETTER DATED THE NEXT DAY, OCTOBER 4, 1957, WHICH WAS SIGNED BY MR. SOL C. BENNETT AS THE CORPORATION'S AUTHORIZED REPRESENTATIVE, THE NAVY PURCHASING OFFICE WAS ADVISED AS FOLLOWS:

"RE: SPD-1B8 (MT:JF)

IFB600-300-58

3 OCTOBER 1957

"GENTLEMEN:

"IN ACCORDANCE WITH THE SUBJECT REFERENCE LETTER, PLEASE BE ADVISED OF THE FOLLOWING:

"THE UNDERSIGNED HEREBY AGREES TO ACCEPT AN INCREASE OF 100 UNITS IN THE QUANTITY OF ITEM 1 FOR DAVENPORTS AT A UNIT PRICE OF $153.60 FOR THE ENTIRE QUANTITY OF 200 UNITS; AN INCREASE OF 200 UNITS IN THE QUANTITY OF ITEM 2 FOR EASY ARM CHAIRS AT A UNIT PRICE OF $76.85 FOR THE ENTIRE QUANTITY OF 400 UNITS; AN INCREASE OF 200 UNITS IN THE QUANTITY OF ITEM 3 FOR OCCASIONAL ARM CHAIRS AT A UNIT PRICE OF $58.20 FOR THE ENTIRE QUANTITY OF 400 UNITS. ALL THE TERMS AND CONDITIONS OF THE ORIGINAL INVITATION IFB600-300-58, INCLUDING THE DISCOUNT OF 1 PERCENT IN 20 DAYS WILL APPLY. DELIVERY OF THE ADDITIONAL QUANTITY WILL BE MADE DURING JANUARY, 1958.'

MONTH YEAR

"AS YOU WILL NOTE, THE ABOVE PRICES HAVE NOT BEEN CHANGED, DUE TO THE FACT THAT THE ORIGINAL QUOTATIONS GIVEN TO THE GOVERNMENT BY OUR COMPANY WERE EXTREMELY LOW AS FURTHER REFLECTED BY OTHER COMPANY BIDS.

"IT IS UNDERSTOOD AND AGREED ON OUR PART THAT THE INSPECTION FOR THE CONFORMANCE FOR THE CONTRACT REQUIREMENTS IS TO BE ORIGINALLY MADE AT CONTRACTOR'S PLANT, SUBJECT TO INSPECTION AS TO QUANTITY RECEIVED IN GOOD ORDER AND CONDITION, WITH FINAL ACCEPTANCE AT DESTINATION.

"YOUR EARLY PROCESSING OF THE FORMAL CONTRACT WILL BE GREATLY APPRECIATED FOR PRODUCTION PURPOSES.'

IT IS REPORTED THAT ON OCTOBER 8, 1957, MR. ROSENBERG, ONE OF THE CORPORATION'S VICE-PRESIDENTS, TELEPHONED THE NAVY PURCHASING OFFICE AND EVIDENCED CONCERN OVER THE CORPORATION'S ABILITY TO MEET THE DELIVERY SCHEDULE SET FORTH IN THE INVITATION AND IN THE CORPORATION'S WASHINGTON, D.C., REPRESENTATIVE'S LETTER BID OF OCTOBER 4, 1957, WHICH COVERED THE SET ASIDE QUANTITY RESERVED FOR SMALL BUSINESS; AND THAT THOUGH IT WAS INFERRED FROM MR. ROSENBERG'S CONVERSATION THAT THE CORPORATION WOULD LIKE TO WITHDRAW ITS BID ON THE ADVERTISED QUANTITY AND ITS AGREEMENT TO ACCEPT THE SET ASIDE QUANTITY, NO OFFICIAL REQUEST TO THAT EFFECT WAS MADE BY MR. ROSENBERG.

BY NOTICE OF AWARD DATED OCTOBER 11, 1957, THE CORPORATION WAS ADVISED THAT A CONTRACT FOR FURNISHING THE FURNITURE ADVERTISED IN THE INVITATION, WHICH WAS DESIGNATED AS LOT 1, AND FOR FURNISHING THE SET ASIDE QUANTITY OF FURNITURE, WHICH WAS DESIGNATED AS LOT 2, HAD BEEN AWARDED TO IT AND THAT THE FURNITURE COVERED BY LOTS 1 AND 2 WAS TO BE DELIVERED NOT LATER THAN DECEMBER 31, 1957, AND JANUARY 31, 1958, RESPECTIVELY.

THE RECORD INDICATES THAT ON OCTOBER 21, 1957, MR. STEIN, ONE OF THE CORPORATION'S VICE-PRESIDENTS, VISITED THE NAVY PURCHASING OFFICE AND REQUESTED AN AUTHORIZATION TO DEVIATE FROM THE SPECIFICATIONS IN CERTAIN RESPECTS. IN A LETTER DATED OCTOBER 23, 1957, MR. FLEISCHER, THE PRESIDENT OF THE CORPORATION, REQUESTED THAT THE CONTRACT BE CANCELLED FOR THE FOLLOWING REASONS: (1) MR. STEIN, HIS SON-IN-LAW AND THE PERSON WHO SIGNED THE BID FOR LOT 1, WORKING WITH HIS OTHER SON-IN LAW, SIGNED SUCH BID WITHOUT RECEIVING HIS APPROVAL; (2) THAT BEING UNFAMILIAR WITH THE SPECIFICATIONS AND THE WORKMANSHIP REQUIRED, HIS SON-IN-LAW INQUIRED IN THE TRADE AND WAS ADVISED THAT THE SAME OPERATION AND WORKMANSHIP EMPLOYED BY THE CORPORATION AT THAT TIME WOULD BE SUFFICIENT AND WOULD BE A PERMISSIBLE DEVIATION; (3) THAT THE CORPORATION LACKED THE PHYSICAL FACILITIES AND SKILLED LABOR NECESSARY TO MANUFACTURE THE FURNITURE IN ACCORDANCE WITH THE SPECIFICATIONS; (4) THAT ON OCTOBER 8, 1957, HIS SON- IN-LAW ADVISED THE NAVY PURCHASING OFFICE, BY TELEPHONE, THAT THE CORPORATION WOULD BE UNABLE TO FURNISH THE SET ASIDE QUANTITY COVERED BY LOT 2 IN ADDITION TO THE ADVERTISED QUANTITY COVERED BY LOT 1; (5) THAT MR. BENNETT, THE CORPORATION'S WASHINGTON, D.C., REPRESENTATIVE, LACKED THE AUTHORITY TO BIND THE CORPORATION; AND (6) THAT THE CORPORATION WOULD FACE FINANCIAL RUIN IF IT WERE NOT RELIEVED OF ITS OBLIGATION UNDER THE CONTRACT.

IN A LETTER DATED OCTOBER 23, 1957, TO THIS OFFICE, THE CORPORATION REQUESTED THAT IT BE RELIEVED FROM PERFORMANCE OF THE CONTRACT. BY LETTER DATED NOVEMBER 8, 1957, THE CORPORATION SUBMITTED THE AFFIDAVITS OF ITS PRESIDENT AND TWO VICE-PRESIDENTS AND IN SUPPORT OF ITS ALLEGATION THAT ITS BID PRICES WERE NOT BASED ON FURNISHING SPECIFICATION MATERIAL, IT SUBMITTED ITS ORIGINAL ESTIMATE SHEET AND A REVISED ESTIMATE SHEET.

IN REGARD TO THE AUTHORITY OF MR. STEIN, WHO SIGNED THE BID COVERING LOT 1, TO BIND THE CORPORATION, IT IS OBSERVED THAT IN A BIDDERS MAILING LIST APPLICATION DATED JUNE 5, 1957, WHICH WAS FILED BY THE CORPORATION WITH THE NAVY PURCHASING OFFICE, MR. FLEISCHER AS PRESIDENT, MR. ROSENBERG AS VICE-PRESIDENT, AND MR. STEIN AS VICE PRESIDENT, WERE LISTED THEREIN AS PERSONS ,AUTHORIZED TO SIGN BIDS AND CONTRACTS" IN THE CORPORATION'S NAME. SINCE MR. STEIN WAS LISTED IN THE APPLICATION AS ONE OF THE PERSONS AUTHORIZED TO SIGN BIDS AND CONTRACTS, WE CONCLUDE THAT HE HAD THE AUTHORITY TO BIND THE CORPORATION IN REGARD TO THE DELIVERY OF THE FURNITURE COVERED BY LOT 1 OF THE CONTRACT.

WITH RESPECT TO THE QUESTION AS TO WHETHER A VALID AND BINDING CONTRACT WAS CONSUMMATED BY ACCEPTANCE OF THE CORPORATION'S BID ON LOT 1, IT MAY BE OBSERVED THAT THE INVITATION TO BID WAS CLEAR AND UNAMBIGUOUS AND LEFT NO ROOM FOR DOUBT THAT THE FURNITURE WAS TO BE MANUFACTURED IN ACCORDANCE WITH THE GOVERNMENT'S SPECIFICATIONS AND DRAWINGS. THE RESPONSIBILITY FOR PREPARATION OF THE BID SUBMITTED IN RESPONSE THERETO WAS UPON THE CORPORATION. SUCH RESPONSIBILITY INCLUDED ASCERTAINING, PRIOR TO BIDDING, THE CONTINGENCIES INVOLVED IN FURNISHING THE REQUIRED SUPPLIES. IN THIS CONNECTION SEE THE CASE OF FRAZIER-DAVIS CONSTRUCTION CO. V. UNITED STATES, 100 C.CLS. 120, 163, WHEREIN THE COURT SAID:

"* * * THE PARTIES ARE DEALING AT ARMS LENGTH AND BIDDERS ARE PRESUMED TO BE QUALIFIED TO ESTIMATE THE PRICE AT WHICH THEY CAN PERFORM THE WORK SPECIFIED AT A REASONABLE PROFIT. IF THEY FAIL TO DO SO, AS PLAINTIFF DID IN THIS CASE, THE GOVERNMENT CANNOT FOR THAT REASON BE HELD FOR THE RESULTING LOSS.'

IF, AS ALLEGED, THE COMPANY'S VICE-PRESIDENT ERRONEOUSLY ASSUMED THAT CERTAIN REQUIREMENTS OF THE SPECIFICATIONS AND DRAWINGS WOULD BE WAIVED BY THE GOVERNMENT, IT IS CLEAR THAT SUCH ERROR WAS DUE SOLELY TO HIS OWN NEGLIGENCE OR OVERSIGHT AND WAS IN NO WAY INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. SEE CRYMES V. SANDERS ET AL., 93 U.S. 55, 61. ANY ERROR THAT WAS MADE IN THE BID WAS UNILATERAL--- NOT MUTUAL--- AND, THEREFORE, DOES NOT ENTITLE THE CORPORATION TO RELIEF. SEE SALIGMAN ET AL. V. UNITED STATES, 56 F.SUPP. 505, 507; AND OGDEN AND DOUGHERTY V. UNITED STATES, 102 C.CLS. 249, 259. THERE WAS NOTHING ON THE FACE OF THE CORPORATION'S BID TO INDICATE THAT THE PRICES QUOTED THEREIN WERE BASED ON MATERIALS OTHER THAN THAT REQUIRED BY THE SPECIFICATIONS. THE CONTRACTING OFFICER REPORTS THAT HE WAS NOT AWARE OF THE POSSIBILITY OF ERROR PRIOR TO AWARD, AND IN VIEW OF THE COMPARATIVELY SMALL DIFFERENCE BETWEEN THE BIDS, WE FIND NO LEGAL BASIS TO CHARGE THE CONTRACTING OFFICER WITH CONSTRUCTIVE NOTICE OF ERROR. SO FAR AS THE PRESENT RECORD SHOWS, THE ACCEPTANCE OF THE CORPORATION'S BID WAS IN GOOD FAITH--- NO ERROR HAVING BEEN ALLEGED BY IT UNTIL AFTER AWARD. THE ACCEPTANCE OF THE BID, IN THE CIRCUMSTANCES INVOLVED, CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO. SEE UNITED STATES. V. PURCELL ENVELOPE COMPANY, 249 U.S. 313; AND AMERICAN SMELTING AND REFINING COMPANY V. UNITED STATES, 259 U.S. 75.

ACCORDINGLY, ON THE BASIS OF THE PRESENT RECORD, THERE APPEARS TO BE NO LEGAL BASIS FOR EITHER INCREASING THE PRICES SPECIFIED IN CONTRACT NO. N600/342/446396 FOR LOT 1 OR FOR CANCELLING THAT LOT.

MR. FLEISCHER, THE PRESIDENT OF THE CORPORATION, AND MR. STEIN, THE VICE- PRESIDENT WHO SIGNED THE CORPORATION'S BID ON LOT 1, BOTH CONTEND THAT MR. SOL C. BENNETT, THE CORPORATION'S WASHINGTON, D.C., REPRESENTATIVE LACKED THE AUTHORITY TO ENTER A BID IN BEHALF OF THE CORPORATION ON THE SET ASIDE QUANTITY OF FURNITURE COVERED BY LOT 2. THE RECORD CONTAINS A COPY OF A PURPORTED AGREEMENT DATED MAY 16, 1957, BETWEEN MR. SOL C. BENNETT AND THE DIAMOND PARLOR FURNITURE CO., INC. WHILE SUCH AGREEMENT AUTHORIZES SOL C. BENNETT AND ASSOCIATES "TO ESTABLISH, DEVELOP AND SUPERVISE THE FEDERAL GOVERNMENT BUSINESS OF DIAMOND PARLOR FURNITURE CO., " IT DOES NOT SPECIFICALLY AUTHORIZE THEM TO SIGN BIDS AND CONTRACTS IN THE CORPORATION'S NAME. THE FACT THAT THE CORPORATION FAILED TO DESIGNATE SOL C. BENNETT AS ONE OF THE "PERSONS OR CONCERNS AUTHORIZED TO SIGN BIDS AND CONTRACTS" IN ITS NAME IN THE BIDDERS MAILING LIST APPLICATION FILED BY IT ON JUNE 5, 1957, WITH THE NAVY PURCHASING OFFICE, SUPPORTS THE CORPORATION'S POSITION THAT IT DID NOT INTEND TO GRANT SUCH AUTHORITY TO MR. SOL C. BENNETT, AND WE THINK IT REASONABLE TO CONCLUDE THAT THE NAVY PURCHASING OFFICE WAS CHARGEABLE WITH NOTICE OF SUCH LACK OF AUTHORITY. IN THE CIRCUMSTANCES OF THIS CASE, WE HAVE SERIOUS DOUBT THAT THE PURPORTED ACCEPTANCE BY THE GOVERNMENT OF THE LETTER BID DATED OCTOBER 4, 1957, SUBMITTED BY MR. SOL C. BENNETT AS THE AUTHORIZED REPRESENTATIVE OF THE DIAMOND PARLOR FURNITURE CO., INC., CONSUMMATED A VALID AND BINDING CONTRACT. ACCORDINGLY, LOT 2 OF CONTRACT NO. N600/342/46396 SHOULD BE CANCELLED WITHOUT LIABILITY TO THE CORPORATION.