B-165566, DEC. 6, 1968

B-165566, DEC. 6, 1968

TO MR. DRIVER:

WE REFER TO LETTERS DATED OCTOBER 31, 1968, AND NOVEMBER 21, 1968 (YOUR REFERENCE 134G), FROM THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE AND SURGERY, FORWARDING REPORTS CONCERNING AN ALLEGED MISTAKE IN QUOTATION BY TRAVENOL LABORATORIES, INC., UNDER PURCHASE ORDER NO. 697, ISSUED BY THE VETERANS ADMINISTRATION HOSPITAL, INDIANAPOLIS, INDIANA.

ON AUGUST 20, 1968, RESPONSIBLE MEDICAL OFFICIALS IN THE RENAL SECTION OF THE HOSPITAL REQUISITIONED FIVE ITEMS OF SUPPLIES, IN VARIOUS QUANTITIES, FOR A HEMODIALYSIS UNIT. THE SECOND ITEM WAS DESCRIBED IN THE REQUISITION AS: "ULTRA FLOW 100 DIALYZER COIL. 6 PER CASE AT $120.00 PER CASE 5M0235.' THIRTY-FIVE CASES OF THESE COILS WERE REQUISITIONED AND THE ESTIMATED COST WAS STATED AS $420. THE DOCTOR WHO INITIATED THE REQUEST FOR SUPPLIES CERTIFIED THAT IN HIS PROFESSIONAL OPINION "THIS BRAND (TRAVENOL-S) IS THE ONLY ONE WHICH WILL MEET MY SPECIFICATION FOR PATIENT CARE.'

ON AUGUST 23, 1968, A REQUEST FOR QUOTATIONS WAS SENT TO TRAVENOL LABORATORIES. ON THIS FORM, ITEM 2 WAS DESCRIBED AS ABOVE, BUT THE PHRASE "AT $120.00 PER CASE" WAS OMITTED. THE UNIT UPON WHICH A QUOTATION WAS SOUGHT WAS PER CASE; TRAVENOL QUOTED, IN THE COLUMN MARKED "UNIT PRICE," $19 AND ENTERED, AS THE TOTAL, THE AMOUNT OF $665. AFTER DELIVERY, TRAVENOL SUBMITTED TO THE VETERANS ADMINISTRATION AN INVOICE LISTING A UNIT PRICE OF $114 FOR ITEM 2 AND A TOTAL PRICE FOR THIS ITEM OF $3,990. PAYMENT HAS BEEN MADE TO THE COMPANY ONLY IN THE AMOUNT OF THE PRICE ORIGINALLY QUOTED.

THE RECORD FULLY SUPPORTS THE CONCLUSION THAT THE FIGURE OF $19 REPRESENTS TRAVENOL'S PRICE PER COIL AND THAT, PACKED SIX COILS TO THE CASE, THE PRICE TRAVENOL SHOULD HAVE QUOTED PER CASE WAS $114, BUT FOR ITS ERROR. NO VERIFICATION WAS REQUESTED IN THIS INSTANCE APPARENTLY BECAUSE THE ESTIMATED TOTAL COST OF $420 FOR ITEM 2 WAS LESS THAN THE QUOTED PRICE OF $665.

THE PHRASE "AT $120.00 PER CASE" WAS CROSSED OUT ON THE REQUISITION FORM SUBMITTED BY THE MEDICAL OFFICIALS. THE SUPPLEMENTAL ADMINISTRATIVE REPORT DISCLOSES THAT IT WAS THE CONTRACTING OFFICER WHO MADE THIS DELETION. IT SEEMS CLEAR THEREFORE THAT HE WAS CHARGEABLE WITH ACTUAL KNOWLEDGE OF THE ESTIMATED UNIT COST OF $120. IT MAY BE THAT THE TOTAL PRICES OF $420 AND $665 ARE NOT SO OUT OF LINE AS TO REQUIRE SOME INQUIRY BY THE CONTRACTING OFFICER. HOWEVER, THE UNIT PRICES OF $120 (ESTIMATED) AND $19 (QUOTED) ARE GROSSLY DISPROPORTIONATE AND FOR THIS REASON THE CONTRACTING OFFICER SHOULD HAVE INVESTIGATED THE POSSIBILITY THAT TRAVENOL'S QUOTATION WAS IN ERROR.

QUITE APART FROM THAT CONSIDERATION, WE BELIEVE THAT THERE IS A FURTHER REASON FOR RELIEVING TRAVENOL FROM THE CONSEQUENCES OF ITS ERROR. IT IS TO BE OBSERVED THAT THE ESTIMATED TOTAL COST FOR ITEM 2 WAS LISTED ON THE REQUISITION FORM AS $420. THIRTY-FIVE OF THESE CASES AT $120 PER CASE ACTUALLY AMOUNTS TO $4,200. THEREFORE, THE QUOTED FIGURE OF $665 WAS COMPARED TO AN INACCURATE ESTIMATE. HAD THE ESTIMATE BEEN CORRECT, THE CONTRACTING OFFICER WOULD HAVE READILY SEEN THAT THE QUOTED PRICE WAS LESS THAN ONE-SIXTH OF THE ESTIMATE. IN SUCH A SITUATION, IT MUST BE SAID THAT THE ERRONEOUS ESTIMATE CONTRIBUTED TO THE CONTRACTING OFFICER'S FAILURE TO NOTE AND CORRECT THE ERRONEOUS QUOTATION.

WE HAVE HELD IN CIRCUMSTANCES SUCH AS ARE PRESENT HERE THAT REFORMATION OF THE CONTRACT IS PERMISSIBLE. B-147580, NOVEMBER 21, 1961; B-153656, MARCH 30, 1964; B-149283, DECEMBER 26, 1962. IN THE LAST CITED CASE WE HELD:

"THERE REMAINS TO BE CONSIDERED WHETHER THE CONTRACT MAY BE REFORMED NOTWITHSTANDING YOUR UNILATERAL MISTAKE. AT THE DATE OF AWARD THE GOVERNMENT ESTIMATE OF THE COST OF THE FABRICATING OF EACH UNIT WAS $12.91. SINCE YOUR OFFER OF $12.82 WAS NOT SIGNIFICANTLY LOWER THAN EITHER THE EXISTING ESTIMATE OR THE NEXT LOW OFFER, THE CONTRACTING OFFICER HAD NO REASON TO SUSPECT ANY ERROR. NEVERTHELESS, WE HAVE HELD THAT WHERE THE RECORD SHOWS THAT THE CONTRACTING OFFICER WOULD HAVE QUESTIONED THE PRICES QUOTED BY THE LOW BIDDER, IF A CORRECT GOVERNMENT ESTIMATE OF THE COST OF THE WORK HAD BEEN PREPARED PRIOR TO AWARD, THE CONTRACT MAY BE AMENDED TO REFLECT THE UNIT PRICES SHOWN IN THE BIDDER'S REVISED BID. * * * SINCE THE ADMINISTRATIVE AGENCY REPORTS THAT YOUR PROPOSAL IS EXCESSIVELY LOWER THAN THE CORRECTED GOVERNMENT ESTIMATE, WE BELIEVE THE RATIONALE OF THE CITED DECISIONS PERMITS REFORMATION IN THE INSTANT CASE. * * *"

FOR THE ABOVE REASONS, THE AMOUNT OF $3,325, OR THE DIFFERENCE BETWEEN ITS QUOTED PRICE OF $665 FOR ITEM 2 AND ITS BILLED PRICE OF $3,990, MAY BE PAID TO TRAVENOL IF OTHERWISE PROPER.