B-163544, FEB. 27, 1968

B-163544, FEB. 27, 1968

CONTRACTS - MISTAKES - RELIEF DECISION TO GSA AUTHORIZING CANCELLATION OF CONTRACT WITH VAN ITALLIE CORPORATION FOR MISTAKE IN BID ALLEGED AFTER AWARD OF SALE OF SURPLUS INDUSTRIAL DIAMONDS. HIGH BIDDER FOR INDUSTRIAL DIAMONDS WHO IMMEDIATELY AFTER AWARD ALLEGED MISTAKE PRICE IN THAT HE INTENDED TO BID $2,800 RATHER THAN $4,160 PRICE ON ANOTHER SCRAP SALE MAY HAVE CONTRACT CANCELLED SINCE CONTRACTING OFFICER IF HE HAD BEEN PROPERLY ADVISED OF MARKET PRICE FOR ITEM WOULD HAVE REQUESTED VERIFICATION.

TO MR. KNOTT:

WE REFER TO A LETTER DATED FEBRUARY 9, 1968, WITH ENCLOSURES, FROM THE ACTING GENERAL COUNSEL, SUBMITTING FOR OUR CONSIDERATION THE REQUEST OF MR. FRANK E. KOEBEL, JR., VICE PRESIDENT OF THE VAN ITALLIE CORPORATION, 70 WEST 40TH STREET, NEW YORK, NEW YORK, FOR RELIEF FROM A MISTAKE IN BID ALLEGED AFTER AWARD OF A SALE OF SURPLUS INDUSTRIAL DIAMONDS.

SALE INVITATION FOR BIDS NO. 9DPS/SF/67-292, ISSUED JUNE 13, 1967, BY THE SAN FRANCISCO REGIONAL OFFICE, INVITED BIDS ON ONE LOT OF SCRAP DIAMONDS DESCRIBED AS "INDUSTRIAL DIAMONDS SALVAGED FROM DRILL BITS, IN SCRAP AND USED CONDITION. CONSISTS PREDOMINANTLY OF WEST AFRICAN MATERIAL WITH SIZE RANGE PRINCIPALLY BETWEEN NO. 10 CHRISTENSEN SIEVE AND THE PLUS 200 MESH USS SIEVE. QUANTITY: APPROXIMATELY 1,275.04 CARAT WEIGHT. 1 LOT.' BIDS WERE OPENED ON JUNE 30, 1967.

IT IS REPORTED THAT THE UPSET PRICE FOR THIS LOT OF DIAMONDS WAS ESTABLISHED AT $2,500. THE HIGH BID OF $4,160 WAS SUBMITTED BY THE VAN ITALLIE CORPORATION AND 21 ADDITIONAL BIDS WERE SUBMITTED RANGING FROM $8.75 TO THE NEXT HIGH BID OF $2,754.09. THE CONTRACTING OFFICER ACCEPTED THE HIGH VAN ITALLIE BID AND NOTICE OF AWARD NO. A-106202 COVERING THE LOT WAS ISSUED TO VAN ITALLIE ON JULY 5, 1967.

MR. KOEBEL ALLEGED ON JULY 7, 1967, THAT HE HAD MADE A MISTAKE IN BID. BY CONFIRMING LETTER OF THE SAME DATE IN SUPPORT OF HIS ALLEGATION, MR. KOEBEL CONTENDED THAT HE INTENDED TO BID $2,800 ON THE LOT AND ALLEGED THAT THE ERROR OCCURRED BECAUSE HE HAD BID $4,160 THE WEEK BEFORE ON A SIMILAR SALE OF SCRAP DIAMONDS OFFERED BY THE GENERAL SERVICES ADMINISTRATION (GSA) IN SEATTLE AND INADVERTENTLY INSERTED THE SAME PRICE FOR THIS SALE. THE LOT OF SCRAP DIAMONDS IN THE SEATTLE SALE CONSISTED OF APPROXIMATELY 1,974.38 CARAT WEIGHT. VAN ITALLIE'S REQUEST THAT THE GOVERNMENT ACCEPT AN AMENDED BID IN THE AMOUNT OF $2,800 WAS DENIED ON AUGUST 8, 1967. WHILE THE MATTER WAS APPEALED UNDER THE DISPUTES CLAUSE OF THE CONTRACT TO THE GSA BOARD OF CONTRACT APPEALS, THAT BOARD IN EFFECT DENIED JURISDICTION OVER THE MATTER. IT IS NOTED THAT PAYMENT HAS NOT BEEN MADE AND THAT DELIVERY HAS NOT BEEN MADE TO VAN ITALLIE.

WITH RESPECT TO THE FOREGOING, WE ARE ADVISED BY YOUR ACTING GENERAL COUNSEL THAT THE PROPERTY IN QUESTION WAS REPORTED FOR SALE AS SCRAP TO GSA BY THE BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR; THAT THE CONTRACTING OFFICER WAS SELLING SCRAP DIAMONDS FOR THE FIRST TIME AND HAD NO KNOWLEDGE OF THEIR MARKET VALUE; AND THAT, BASED ON ADVICE OF THE PERSONAL MANAGEMENT AND DISPOSAL SERVICE (PMDS), WASHINGTON, THAT CRUSHING BORT DIAMONDS WERE SELLING FROM $2 TO $4.50 PER CARAT WEIGHT, THE CONTRACTING OFFICER MADE AWARD TO VAN ITALLIE AT ITS BID PRICE OF $4,160 OR APPROXIMATELY $3.26 PER CARAT.

HOWEVER, AFTER A CAREFUL REVIEW OF THE MATTER, IT IS REPORTED THAT THE SCRAP DIAMONDS WOULD ONLY BE GOOD FOR CRUSHING BORT AND, AS SUCH, WOULD ONLY BE WORTH FROM $2 TO $2.50 A CARAT WEIGHT ON THE OPEN MARKET, AND THAT THE SELLING PRICE INFORMATION GIVEN THE CONTRACTING OFFICER BY THE WASHINGTON OFFICE WAS NOT CLEARLY STATED. WE ARE ADVISED THAT THE WASHINGTON OFFICE MEANT TO INFORM THE CONTRACTING OFFICER THAT THE SCRAP DIAMONDS WERE ONLY GOOD FOR CRUSHING BORT AND THAT THE MARKET PRICE FOR BORT WAS FROM $2 TO $2.50 PER CARAT WEIGHT BUT, IF THERE WERE CUTTABLE DIAMONDS IN THE LOT, THESE CUTTABLE DIAMONDS COULD SELL FOR AS HIGH AS $4.50 PER CARAT WEIGHT.

IT IS STATED THAT IF THE CONTRACTING OFFICER HAD BEEN PROPERLY ADVISED OF THE MARKET PRICE OF CRUSHING DIAMOND BORT, HE WOULD HAVE REALIZED THAT THE VAN ITALLIE BID WAS UNUSUALLY HIGH AND REPRESENTED SUCH A DISPARITY IN THE BID PRICES REASONABLY EXPECTED TO BE RECEIVED FOR CRUSHING BORT THAT THE GOVERNMENT SHOULD HAVE BEEN PLACED ON NOTICE OF THE PROBABILITY OF A MISTAKE. IN VIEW OF THE FOREGOING, IT IS RECOMMENDED THAT THE AWARD MADE TO VAN ITALLIE BE CANCELED.

ORDINARILY, A WIDE RANGE OF BID PRICES IN SURPLUS SALES IS NOT DEEMED TO BE CONSTRUCTIVE NOTICE OF ERROR BECAUSE OF THE MANY POSSIBLE USES TO WHICH SURPLUS ITEMS MAY BE PUT. B-160704, FEBRUARY 16, 1967; B-147427, NOVEMBER 6, 1961; AND B-149302, JULY 13, 1962. HOWEVER, BUT FOR THE ERRONEOUS INFORMATION RELIED ON BY THE CONTRACTING OFFICER AS TO MARKET PRICE OF THE MATERIAL INVOLVED AND THE LIMITED USE FOR CRUSHING DIAMOND BORT, THE DISPARITY OF THE VAN ITALLIE BID SHOULD HAVE BEEN APPARENT. CF. B-158334, JANUARY 21, 1966; B-149660, SEPTEMBER 21, 1962.

IN THE CIRCUMSTANCES, AND SINCE A SMALL VARIANCE IN BID PRICES IS EXPECTED IN BID PRICES FOR THIS ITEM AND SINCE A BONA FIDE ERROR WAS MADE AS ALLEGED, WE AGREE THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF A POSSIBLE MISTAKE IN BID WHICH SHOULD HAVE BEEN VERIFIED PRIOR TO AWARD. ACCORDINGLY, THE CONTRACT WITH THE VAN ITALLIE CORPORATION SHOULD BE CANCELED AS ADMINISTRATIVELY RECOMMENDED WITHOUT LIABILITY TO THE CORPORATION.