B-187992, JANUARY 4, 1977

B-187992, JANUARY 4, 1977

1. PURCHASER WHOSE BID PRICE OF $.2651 PER POUND WAS 3.4 TIMES GREATER THAN SECOND HIGHEST BID AND 2.41 TIMES GREATER THAN CURRENT MARKET APPRAISAL OF $.11 PER POUND MAY HAVE SALES CONTRACT REFORMED SINCE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF POSSIBILITY OF MISTAKE IN BID BECAUSE OF WIDE PRICE VARIATIONS WHICH ARE NOT NORMALLY ENCOUNTERED IN SALE OF SCRAP, AND SHOULD HAVE REQUESTED VERIFICATION OF BID BEFORE ACCEPTANCE. 2. ALTHOUGH SALES CONTRACTOR ENTITLED TO MISTAKE IN BID RELIEF NORMALLY MAY NOT HAVE CONTRACT PRICE RECALCULATED ON BASIS OF FACTORS NOT CONSIDERED IN FORMULATION OF BID, WHERE CONTRACT HAS BEEN FULLY PERFORMED SO THAT RESCISSION IS NOT FEASIBLE, CONTRACT PRICE MAY BE REFORMED TO AMOUNT OF SECOND HIGHEST BID.

LURIA BROTHERS COMPANY, INC.:

THE DEFENSE SUPPLY AGENCY (DSA) HAS REFERRED TO THIS OFFICE THE CLAIM OF LURIA BROTHERS COMPANY, INC. (LURIA) THAT IT MADE A MISTAKE IN BID IN CONNECTION WITH ITEM 102 ON SURPLUS PROPERTY SALE NO. 27-5303.

ITEM 102, ADVERTISED AS 117,000 POUNDS OF MIXED METALS, SCRAP, WAS AWARDED TO LURIA ON MAY 13, 1975, AT ITS BID PRICE OF $.2651 PER POUND. SHORTLY AFTER RECEIPT OF THE SCRAP METAL, LURIA NOTIFIED DSA THAT THE MATERIAL WAS NOT WHAT IT BID ON. AFTER SEVERAL MONTHS OF CORRESPONDENCE WITH DSA, LURIA, BY LETTERS DATED AUGUST 19 AND 27, 1976, REQUESTED RELIEF BASED ON A MISTAKE IN BID AS A RESULT OF A PRE BID INSPECTION DURING WHICH LURIA APPARENTLY MISTOOK FOR ITEM 102 ANOTHER PILE OF MATERIAL WHICH LAY IN CLOSE PROXIMITY TO IT. BECAUSE THIS OTHER PILE WAS MORE VALUABLE THAN ITEM 102, LURIA SUBMITTED A BID WHICH WAS SIGNIFICANTLY HIGHER THAN BOTH THE NEXT HIGH BID AND THE ESTIMATED MARKET VALUE FOR ITEM 102. DSA REPORTS THAT THE CONTRACTING OFFICER ACCEPTED LURIA'S BID WITHOUT REQUESTING VERIFICATION DESPITE "THE DISPARITIES AMONG LURIA'S BID $.2651 PER POUND, THE NEXT HIGH BID $.078 PER POUND, AND THE CURRENT MARKET APPRAISAL ESTABLISHED PRIOR TO BID OPENING-- $.11 PER POUND WHICH SHOULD HAVE ALERTED THE CONTRACTING OFFICER TO THE POSSIBILITY OF MISTAKE * * *." DSA THEREFORE RECOMMENDS THAT THE CONTRACT BE REFORMED TO REFLECT A PRICE OF $.078 PER POUND, EXPLAINING THAT " * * * BECAUSE OF MARKET DECLINES SINCE THE SALE, $.078 PER POUND REPRESENTS MORE THAN THE MATERIAL'S CURRENT MARKET VALUE. IF, THEREFORE, LURIA RETURNED THE PROPERTY NOW, NOT ONLY WOULD IT INCUR SUBSTANTIAL TRANSPORTATION COSTS, BUT THE GOVERNMENT WOULD PROBABLY OBTAIN LOWER PRICES WITH THE ADDITIONAL EXPENSE OF READVERTISING."

GENERALLY, IF A BIDDER MAKES A UNILATERAL MISTAKE IN SUBMITTING ITS BID WHICH IT DISCOVERS SUBSEQUENT TO AWARD OF THE CONTRACT, IT IS BOUND BY THE CONTRACT UNLESS THE CONTRACTING OFFICER KNEW, OR SHOULD HAVE KNOWN, OF THE MISTAKE AT THE TIME OF AWARD AND FAILED TO SEEK VERIFICATION OF THE BID. WHERE THE CONTRACTING OFFICER HAD SUCH ACTUAL OR CONSTRUCTIVE NOTICE AND DID NOT DISCHARGE HIS BID VERIFICATION DUTY, THIS OFFICE, UNDER CERTAIN CIRCUMSTANCES, WILL ALLOW CORRECTION OF THE CONTRACT PRICE PROVIDED THE CORRECTED PRICE DOES NOT DISPLACE THE NEXT ACCEPTABLE BID. 37 COMP.GEN. 398(1957); B-176912, FEBRUARY 7, 1973; BARSTOW TRUCK PARTS AND EQUIPMENT COMPANY, INC., B-180869, MAY 21, 1974, 74-1 CPD 274.

THIS OFFICE HAS RECOGNIZED THAT WIDE PRICE VARIATIONS NORMALLY ARE NOT ENCOUNTERED IN THE SALE OF SCRAP METALS BECAUSE OF THE ESTABLISHED MARKET FOR THIS MATERIAL AND THE LIMITED USES TO WHICH IT MAY BE PUT. SEE 49 COMP.GEN. 199, 202(1969). CONSEQUENTLY, WE HAVE HELD THAT "WHERE A MISTAKE IN BID IS ALLEGED ON THE SALE OF GOVERNMENT SCRAP, AND WHERE THERE ARE SUBSTANTIAL DISPARITIES BETWEEN THE HIGH BID AND THE NEXT HIGH BID, AND THE HIGH BID AND THE CURRENT MARKET APPRAISAL, AND ESPECIALLY WHERE THERE IS ALSO A COMPARATIVELY NARROW RANGE AMONG THE LOWER BIDS, THE SALES CONTRACTING OFFICER IS ON CONSTRUCTIVE NOTICE OF A POSSIBLE MISTAKE IN THE HIGH BID AND SHOULD REQUEST VERIFICATION OF THE BID PRIOR TO AWARD." SITKIN SMELTING AND REFINING, INC., B-182334, DECEMBER 16, 1974, 74-2 CPD 348; ACME REFINING-SMELTING COMPANY, B-181967, AUGUST 20, 1974, 74-2 CPD 113; COMMERCIAL METALS COMPANY, B-185255, NOVEMBER 28, 1975, 75-2 CPD 365.

IN THE PRESENT CASE, THE HIGH BID FOR THE SCRAP METAL DENOMINATED AS ITEM 102 VARIED SUBSTANTIALLY FROM BOTH THE NEXT HIGH BID AND THE CURRENT MARKET APPRAISAL. THE HIGH BID, $.2651 PER POUND, WAS 3.40 TIMES GREATER THAN THE SECOND HIGH BID, $.078 PER POUND, AND WAS 2.41 TIMES GREATER THAN THE CURRENT MARKET APPRAISAL ESTABLISHED PRIOR TO BID OPENING, $.11 PER POUND. MOREOVER, THE RANGE OF $.1871 PER POUND BETWEEN THE SECOND HIGHEST OF THE 13 BIDS AND THE HIGH BID WAS OVER 2.5 TIMES AS GREAT AS THE RANGE OF $.0705 PER POUND BETWEEN THE SECOND HIGHEST BID AND THE LOWEST BID AND WAS OVER 10 TIMES AS GREAT AS THE RANGE OF $.018 PER POUND BETWEEN THE SECOND HIGHEST BID AND THE THIRD HIGHEST BID. ACCORDINGLY, WE AGREE WITH DSA THAT THE CONTRACTING OFFICER WAS ON CONSTRUCTIVE NOTICE OF A POSSIBLE ERROR IN LURIA'S BID AND WAS REQUIRED TO SEEK VERIFICATION FROM LURIA PRIOR TO AWARD. THE CONTRACTING OFFICER'S FAILURE TO DO SO ENTITLES LURIA TO RELIEF.

IN CASES SIMILAR TO THIS WHERE THE BIDDER REQUESTS THAT THE CONTRACT PRICE BE RECALCULATED BASED UPON FACTORS NOT CONSIDERED IN THE ORIGINAL BID, WE HAVE NOT ALLOWED SUCH RECALCULATION FOR THE REASONS STATED IN 17 COMP.GEN. 575, 577(1938):

"THE BASIC RULE IS, OF COURSE, THAT BIDS MAY NOT BE CHANGED AFTER THEY ARE OPENED, AND THE EXCEPTION PERMITTING A BID TO BE CORRECTED UPON SUFFICIENT FACTS ESTABLISHING THAT A BIDDER ACTUALLY INTENDED TO BID AN AMOUNT OTHER THAN SET DOWN ON THE BID FORM, WHERE THE CONTRACTING OFFICER IS ON NOTICE OF THE ERROR PRIOR TO ACCEPTANCE, DOES NOT EXTEND TO PERMITTING A BIDDER TO RECALCULATE AND CHANGE HIS BID TO INCLUDE FACTORS WHICH HE DID NOT HAVE IN MIND WHEN HIS BID WAS SUBMITTED, OR AS TO WHICH HE HAS SINCE CHANGED HIS MIND. TO PERMIT THIS WOULD REDUCE TO A MOCKERY THE PROCEDURE OF COMPETITIVE BIDDING REQUIRED BY LAW IN THE LETTING OF PUBLIC CONTRACTS. * * * " SEE ALSO B-174620, FEBRUARY 2, 1972.

ALTHOUGH NORMALLY THE ONLY RELIEF AVAILABLE TO THE CONTRACTOR IN THIS SITUATION WOULD BE RESCISSION OF THE CONTRACT, HERE LURIA HAS PAID FOR AND RECEIVED ITEM 102 AND THE CONTRACT HAS BEEN FULLY EXECUTED. WE HAVE RECOGNIZED THAT WHERE ALL OBLIGATIONS ARISING UNDER THE CONTRACT HAVE BEEN DISCHARGED, RESCISSION IS NOT FEASIBLE. UNITED MINERAL & CHEMICAL CORPORATION, B-183756, JULY 8, 1975, 75-2 CPD 20. FURTHER, THE MARKET VALUE OF THE MATERIAL HAS DECLINED BELOW THE SECOND HIGHEST BID SO THAT THE GOVERNMENT STANDS TO INCUR ADDITIONAL EXPENSE IF IT HAS TO AGAIN OFFER THE MATERIAL FOR SALE.

ACCORDINGLY, WE CONCUR WITH DSA'S RECOMMENDATION THAT THE CONTRACT PRICE BE REFORMED TO $.078 PER POUND, THE AMOUNT OF THE SECOND HIGHEST BID.