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CONTRACTS - AWARDS - CANCELLATION - ERRONEOUS AWARDS - CANCELLATION NOT REQUIRED CANCELLATION OF A CONTRACT WHICH WAS AWARDED TO THE SECOND LOW BIDDER ON THE BASIS OF AN ERRONEOUS EVALUATION OF FREIGHT CHARGES BY THE GOVERNMENT BUT WHICH WILL RESULT IN A LOWER ACTUAL COST TO THE GOVERNMENT BY REASON OF A NEW FREIGHT RATE FILED AFTER AWARD THAN IF THE BIDS HAD BEEN PROPERLY EVALUATED AND AN AWARD MADE TO THE LOW BIDDER IN THE FIRST INSTANCE WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT IN VIEW OF THE INCREASED COST AND THE FACT THAT THE CONTRACTOR HAS INCURRED SUBSTANTIAL EXPENSES TOWARD COMPLETION OF THE CONTRACT. 1964: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 4. THE INVITATION WAS ISSUED MAY 21.

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B-155133, OCTOBER 9, 1964, 44 COMP. GEN. 204

CONTRACTS - AWARDS - CANCELLATION - ERRONEOUS AWARDS - CANCELLATION NOT REQUIRED CANCELLATION OF A CONTRACT WHICH WAS AWARDED TO THE SECOND LOW BIDDER ON THE BASIS OF AN ERRONEOUS EVALUATION OF FREIGHT CHARGES BY THE GOVERNMENT BUT WHICH WILL RESULT IN A LOWER ACTUAL COST TO THE GOVERNMENT BY REASON OF A NEW FREIGHT RATE FILED AFTER AWARD THAN IF THE BIDS HAD BEEN PROPERLY EVALUATED AND AN AWARD MADE TO THE LOW BIDDER IN THE FIRST INSTANCE WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT IN VIEW OF THE INCREASED COST AND THE FACT THAT THE CONTRACTOR HAS INCURRED SUBSTANTIAL EXPENSES TOWARD COMPLETION OF THE CONTRACT.

TO THE SECRETARY OF THE ARMY, OCTOBER 9, 1964:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 4, 1964, FROM YOUR DIRECTOR OF PROCUREMENT, OFFICE OF THE ASSISTANT SECRETARY, REQUESTING A DECISION WHETHER AN AWARD UNDER INVITATION AMC/A/-18-035-64-814 INCORRECTLY MADE TO ORDNANCE PRODUCTS, INC., ON JUNE 12, 1964, SHOULD BE CANCELED AND PLACED WITH THE PROTESTOR, HARVELL-KILGORE CORPORATION.

THE INVITATION WAS ISSUED MAY 21, 1964, BY THE CONTRACTING OFFICER, EDGEWOOD ARSENAL, COVERING APPROXIMATELY 4,000 CRYPTOGRAPHIC EQUIPMENT DESTROYERS. BIDS WERE OPENED AS SCHEDULED ON JUNE 5, 1964, AND THE PERTINENT FACTS ARE ADMINISTRATIVELY REPORTED BY THE CONTRACTING OFFICER AS OLLOWS:

3. AFTER THE BIDS WERE OPENED, THE TRANSPORTATION OFFICER WAS REQUESTED TO FURNISH A COMPUTATION OF FREIGHT COSTS TO THE SPECIFIED DESTINATIONS FROM THE F.O.B. ORIGIN POINTS INDICATED ON THE TWO LOWEST BIDS RECEIVED, WHICH WERE FROM ORDNANCE PRODUCTS, INC. AND HARVELL KILGORE CORP. SUCH FREIGHT COSTS WERE THEN ADDED TO THE ORIGIN BID PRICES. SINCE, UNDER NOTE NO. 3 OF THE SCHEDULE PORTION OF THE IFB, AWARD OF ALL ITEMS WAS TO BE MADE AS A LOT, EVALUATION AND COMPARISON OF BIDS WAS MADE ON THE BASIS OF THE TOTAL EVALUATED BID PRICE FOR ALL THREE ITEMS.

4. THE RESULTS INDICATED THAT THE MOST ADVANTAGEOUS PRICE TO THE GOVERNMENT WAS ORDINANCE PRODUCTS' F.O.B. ORIGIN BID AT A TOTAL OF $73,647.94, REPRESENTING A TOTAL BID OF $67,711.00, LESS A PROMPT PAYMENT DISCOUNT ( 1/10TH OF 1 PERCENT) OF $67.71, PLUS ESTIMATED GOVERNMENT TRANSPORTATION COSTS OF $6,004.65.

HARVELL-KILGORE'S LOWEST ESTIMATED BID PRICE WAS COMPUTED AT $73,905.07, REPRESENTING THEIR DESTINATION BIDS ON ITEMS 2 AND 3, AND THEIR ORIGIN BID ON ITEM 1, TOTALING $72,007.42, NET, PLUS ESTIMATED FREIGHT COSTS ON ITEM 1 OF $1,897.65. AWARD WAS MADE TO ORDNANCE PRODUCTS, INC. AS LOW BIDDER BY $257.12.

5. UPON RECEIPT OF THE PROTEST, THE TRANSPORTATION OFFICER WAS REQUESTED TO REVIEW HIS FREIGHT COST COMPUTATIONS. UPON SUCH REVIEW, IT WAS DISCOVERED THAT AN ERROR HAD BEEN MADE IN THE FREIGHT COSTS COVERING PROPOSED SHIPMENTS OF ITEM 1. APPARENTLY, THE TRANSPORTATION OFFICER HAD ERRONEOUSLY UTILIZED THE FREIGHT RATE FROM THE CONTRACTOR'S POINT OF ORIGIN, NORTH EAST, MARYLAND TO PINE BLUFF ARSENAL, ARKANSAS, FOR ALL SHIPMENTS OF ITEM 1, WHEREAS, 480 EACH, REPRESENTING AT LEAST TWO SHIPMENTS, ACCORDING TO THE SCHEDULE OF DELIVERY, WERE FOR THE PURPOSE OF EVALUATING BIDS, TO BE SHIPPED TO ST. JOHN, UTAH. A SIMILAR ERROR AFFECTING ONE CONTEMPLATED SHIPMENT OF ITEM 1 WAS MADE IN EVALUATING HARVELL-KILGORE'S BID PRICE FOR ITEM 1 (EXHIBIT D). A COPY OF THE FREIGHT COST COMPUTATION INDICATING THE ERRORS AND THE CORRECTED AMOUNTS IN RED INK IS ATTACHED AS EXHIBIT E.

6. ON THE BASIS OF CORRECTED FREIGHT CHARGES TO THE DESTINATIONS INDICATED, HARVELL-KILGORE'S BID WOULD BE EVALUATED AT $74,474.32, AND ORDNANCE PRODUCTS' BID WOULD BE EVALUATED, AFTER APPLYING A PROMPT PAYMENT DISCOUNT, AT $74,583.21.

7. ORDNANCE PRODUCTS, INC., WAS IMMEDIATELY CONTACTED BY TELEPHONE AND ADVISED OF THE PROTEST AND THE NATURE OF THE GOVERNMENT'S FINDINGS UPON RECONSIDERATION. THEY REQUESTED AN OPPORTUNITY TO VIST THE PROCUREMENT OFFICE TO REVIEW THE GOVERNMENT'S COMPUTATIONS. SUCH VISIT WAS MADE ON 30 JUNE 1964. DURING SUCH VISIT THEY STATED DEFINITELY THAT THEY WOULD NOT CONSENT TO A NO-COST CANCELLATION; THAT THEY HAD ALREADY INCURRED EXPENSES UNDER THE CONTRACT AND WOULD PRESS SUIT AGAINST THE GOVERNMENT TO RECOVER IN THE EVENT OF CANCELLATION. THEY ALSO REQUESTED AN OPPORTUNITY TO DETERMINE WHETHER ANY LOWER RATES THAN APPEARED ON THE GOVERNMENT'S COMPUTATION WAS AVAILABLE, SINCE THE DIFFERENCE BETWEEN THEIR REEVALUATED BID AND HARVELL KILGORE'S WAS ONLY $108.00.

8. BY LETTER OF 3 JULY 1964, THEY CONTENDED THAT A LOW RATE WAS AVAILABLE, COVERING ONE OF THE SHIPMENTS OF ITEM 3 (EXHIBIT F). THE INFORMATION FURNISHED WAS CHECKED, AND IT WAS ASCERTAINED THAT SUCH RATE HAD NOT BEEN FILED AS OF THE DATE OF BID OPENING, ALTHOUGH SUCH RATE HAS SINCE BEEN FILED (EXHIBIT G).

9. THE CONTRACTING OFFICER ACCORDINGLY DISPATCHED TO THE CONTRACTOR LETTER DATED 8 JULY 1964, FORMALLY NOTIFYING THE CONTRACTOR OF THE PROTEST AND REQUESTING SUSPENSION OF PERFORMANCE, PENDING RESOLUTION (EXHIBIT H). IN REPLY CONTRACTOR RESPONDED WITH LETTER OF 10 JULY 1964, ADVISING THAT THEY HAD INCURRED ESTIMATED COSTS TO DATE OF ALMOST $10,000.00 (EXHIBIT I).

IN AN ALMOST IDENTICAL SITUATION INVOLVING AN ERRONEOUS FREIGHT EVALUATION ON A BID SUBMITTED BY HARVELL-KILGORE UNDER IFB CML-04-205 62- 30, WE HELD IN B-148569, APRIL 10, 1962, THAT CANCELLATION OF THE AWARD MADE TO ANOTHER BIDDER ON THE BASIS OF THE ERRONEOUS EVALUATION WAS REQUIRED.

HOWEVER, IN THE PRESENT CASE WE ARE FACED WITH A PECULIAR AND DISTINGUISHING FACTUAL SITUATION, IN THAT SINCE THE AWARD WAS MADE THERE HAS BEEN FILED A NEW FREIGHT RATE WHICH WOULD APPLY TO SHIPMENT BY ORDNANCE PRODUCTS, INC., FROM NORTHEAST, MARYLAND, TO YORKTOWN, VIRGINIA, UNDER WHICH THE ACTUAL AGGREGATE COST TO THE GOVERNMENT UNDER THE AWARD MADE WILL IN FACT BE LESS THAN IF THE BIDS HAD BEEN PROPERLY EVALUATED AND AWARD MADE IN HARVELL-KILGORE IN THE FIRST INSTANCE.

WHILE USE OF THIS RATE IN THE ORIGINAL EVALUATION WOULD HAVE BEEN CLEARLY IMPROPER, EVEN IF THE CARRIER'S INTENTION TO FILE IT HAD BEEN KNOWN, WE DO NOT FEEL THAT CANCELLATION OF THE AWARD TO ORDNANCE PRODUCTS COULD, IN THE FACE OF THE PRESENT CIRCUMSTANCES, BE JUSTIFIED AS IN THE INTEREST OF THE GOVERNMENT. IF THE AWARD WERE NOW CANCELED, WE COULD NOT PROPERLY DIRECT AWARD TO HARVELL-KILGORE, KNOWING THAT THE COST OF THE PROCUREMENT WOULD THEREBY BE INCREASED.

IN THE CIRCUMSTANCES, AND IN VIEW OF THE FURTHER FACT THAT ORDNANCE PRODUCTS IS REPORTED TO HAVE INCURRED SUBSTANTIAL EXPENSES BEFORE IT WAS ADVISED OF THE PROTEST, WE CONCUR IN THE RECOMMENDATION OF YOUR DEPARTMENT THAT THE AWARD NOT BE DISTURBED.

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