B-166606, MAY 15, 1969

B-166606, MAY 15, 1969

TO STEEG AND SHUSHAN:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 14, 1969, AND PRIOR CORRESPONDENCE, ON BEHALF OF MANSON, SMITH, MCMASTER, INC., REQUESTING RESCISSION OF CONTRACT NO. DACA 63-69-C-0100 AWARDED TO THAT CORPORATION WITHOUT FORFEITURE OF ITS BID BOND. THIS REQUEST FOR RESCISSION IS BASED UPON A MISTAKE IN BID WHICH WAS ALLEGED AFTER AWARD OF THE CONTRACT.

ON DECEMBER 26, 1968, THE CORPS OF ENGINEERS, U.S. ARMY ENGINEER DISTRICT, FORT WORTH, TEXAS, ISSUED INVITATION FOR BIDS (IFB) NO. DACA 63- 69-C-0063 FOR THE CONSTRUCTION OF A 600 MAN ARMY RESERVE CENTER IN NEW ORLEANS, LOUISIANA. BIDS WERE OPENED ON JANUARY 30, 1969, AND OF THE EIGHT BIDS RECEIVED, THE BID OF MANSON, SMITH, MCMASTER, INC., WAS THE LOWEST RECEIVED. THE TWO LOW BIDS, INCLUDING ALL TEN ADDITIVES, AND THE GOVERNMENT ESTIMATE WERE:

MANSON, SMITH, MCMASTER, INC. $682,400.00

BARTLEY, INCORPORATED $719,305.00

GOVERNMENT ESTIMATE $658,758.40

ON FEBRUARY 6, 1969, A PREAWARD CONFERENCE WAS HELD BY THE CORPS OF ENGINEERS TO DISCUSS THE WORK WITH MANSON, SMITH, MCMASTER, INC., AND A "MEMORANDUM OF UNDERSTANDING" WAS SIGNED BY REPRESENTATIVES OF THE CORPORATION AND THE GOVERNMENT. SUBPARAGRAPH C OF THE MEMORANDUM, WHICH IS OF PARTICULAR RELEVANCE HERE, READS AS FOLLOWS:

"C. THE CONTRACTOR UNDERSTANDS THE REQUIREMENTS OF GENERAL PROVISION TITLED -CONTRACTOR INSPECTION SYSTEM.- THE CONTRACTOR WILL ASSURE THAT THE MATERIALS GOING INTO THE WORK AND THE PROCEDURES EMPLOYED MEET THE CONTRACT REQUIREMENTS. HE MUST HAVE A REGULAR SYSTEM FOR RECORDING AND REPORTING THE ACTIONS WHICH HIS STAFF TAKE TO ASSURE COMPLIANCE WITH THE CONTRACT. THE GOVERNMENT WILL MAKE AVAILABLE THE GOVERNMENT TEST REPORTS SO THAT THE CONTRACTOR WILL NOT HAVE TO DUPLICATE SUCH TESTS.'

A PREAWARD SURVEY OF THE LOW BIDDER WAS CONDUCTED BY GOVERNMENT PERSONNEL AND AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY WAS MADE BY THE CONTRACTING OFFICER ON FEBRUARY 11, 1969. BY LETTER OF AWARD DATED FEBRUARY 12, 1969, AWARD WAS MADE TO MANSON, SMITH, MCMASTER, INC., IN THE APPROXIMATE AMOUNT OF $682,400. THE LETTER OF AWARD TRANSMITTED THE FORMAL CONTRACT AND BOND DOCUMENTS FOR EXECUTION BY THE SUCCESSFUL BIDDER WITHIN 10 DAYS. HOWEVER, MANSON REFUSED TO SIGN THE FORMAL CONTRACT AND EXECUTE PERFORMANCE AND PAYMENT BONDS BECAUSE "CONTRACTOR QUALITY CONTROL SYSTEM" COSTS OF APPROXIMATELY $30,000HAD BEEN MISTAKENLY OMITTED FROM ITS BID. MANSON ADVISED ON FEBRUARY 1969, THAT IF IT WERE FORCED TO PERFORM THE CONTRACT, THE FIRM WOULD SUFFER FINANCIAL DISASTER AND WOULD HAVE TO GO OUT OF BUSINESS.

ON FEBRUARY 20, 1969, MANSON SUBMITTED ITS WORKPAPERS AND REQUESTED THAT THE CONTRACT BE RESCINDED. THE CONTRACTOR STATED THAT IT DID NOT RECEIVE ANY SUB-BIDS ON QUALITY CONTROL, BUT INCLUDED WITH ITS WORKPAPERS ARE TWO PRICE LISTS FROM COMMERCIAL TESTING LABS. HOWEVER, THERE IS NO INDICATION OF THE AMOUNT, IF ANY, INCLUDED IN THE BID FOR QUALITY CONTROL AND SUCH COST WAS NOT SEPARATELY IDENTIFIED. WE ARE ADVISED THAT SUCH COSTS ARE COMMONLY PRORATED INTO OTHER BID ITEMS. THE CONTRACTING OFFICER ADVISES THAT THE CONTRACTOR'S ESTIMATE OF $35,000 (PLUS 6-PERCENT PROFIT FOR A TOTAL OF $37,100) FOR QUALITY CONTROL, SUBMITTED AFTER AWARD, IS CONSIDERED TO BE EXCESSIVE. THE AMOUNT OF $15,500 INCLUDED IN THE GOVERNMENT ESTIMATE FOR QUALITY CONTROL HAS BEEN REVIEWED AND IS CONSIDERED TO BE FAIR AND REASONABLE.

MANSON ALSO CONTENDS THAT IT OMITTED FROM THE BID THE COSTS OF "FIELD OFFICE FOR CORPS OF ENGINEERS.' A REVIEW OF THE CONTRACTOR'S WORKPAPERS DISCLOSES, HOWEVER, THAT AN AMOUNT OF $200 WAS INCLUDED IN THE RECAP SHEET FOR THIS ITEM. THE GOVERNMENT ESTIMATE INCLUDED $500 FOR A FIELD OFFICE AND SHED. THE CONTRACTOR'S ALLEGATION OF A COST OF $3,000 (PLUS 6-PERCENT PROFIT FOR A TOTAL OF $3,180) FOR THIS ITEM IS CONSIDERED TO BE EXCESSIVE. THE TOTAL MISTAKE ALLEGED BY MANSON THUS TOTALS $40,280. THIS BASIS, THE TOTAL REVISED BASE BID WOULD BE $675,780 AND THE REVISED TOTAL BID, INCLUDING ALL ADDITIVES, WOULD BE $722,680. IN THIS REGARD, IT IS NOTED THAT THE CONTRACTOR SHOWS TOTALS IN SLIGHT VARIANCE TO THE FOREGOING TOTALS.

IN CASES WHERE A MISTAKE HAS BEEN ALLEGED AFTER AWARD OF THE CONTRACT, OUR OFFICE WILL GRANT RELIEF ONLY IF THE MISTAKE WAS MUTUAL OR THE CONTRACTING OFFICER WAS ON ACTUAL OR CONSTRUCTIVE NOTICE OF THE ERROR PRIOR TO AWARD. THIS IS A WELL-ESTABLISHED PRINCIPLE OF THE LAW OF CONTRACTS, AND IS EQUALLY APPLICABLE TO PRIVATE AND PUBLIC CONTRACTS, WHETHER MADE BY NEGOTIATION OR BY FORMAL ADVERTISING. SEE B-163970, MAY 7, 1968, AND CASES CITED THEREIN. THE MISTAKES, AS ALLEGED HERE, WERE NOT EVIDENT ON THE FACE OF THE BID, BECAUSE THE MANSON BID DID NOT CONTAIN A SEPARATE BID ITEM FOR EITHER QUALITY CONTROL OR AN OFFICE FOR CORPS OF ENGINEERS. THE CONTRACTING OFFICER COULD NOT HAVE BEEN AWARE OF SUCH MISTAKES BY EXAMINING THE BID ITSELF. FURTHERMORE, THE PERCENTAGE DIFFERENTIAL BETWEEN THE CONTRACTOR'S BID, WHICH EXCEEDED THE GOVERNMENT ESTIMATE BY 3.5 PERCENT, AND THE SECOND LOW BID WAS ONLY 5.4 PERCENT. THEREFORE, WE DO NOT BELIEVE THAT THE CONTRACTING OFFICER WAS ON NOTICE OF MISTAKE IN BID PRIOR TO AWARD, NOR SHOULD HE HAVE BEEN. SEE WENDER PRESSES, INC. V UNITED STATES, 170 CT. CL. 483; 20 COMP. GEN. 652; 23 ID. 596; B-164439, AUGUST 26, 1968, AND B-165047, SEPTEMBER 5, 1968.

THE ACCEPTANCE OF THE BID OF MANSON, SMITH, MCMASTER, INC., WAS MADE IN GOOD FAITH AND WITHOUT NOTICE, ACTUAL OR CONSTRUCTIVE, OF ANY ERROR. THE RESULTING CONTRACT, IN OUR OPINION, WAS THEREFORE VALID AND BINDING, AND FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES. SEE ..END :