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Price Adjustment for Unilateral Mistake in Bid Granted


An appeal seeking reformation of a contract price was granted by the Civilian Board of Contract Appeals because the contracting officer should have been alerted to a possible mistake in the contractor's bid. The contractor contended it inadvertently used the price for low sodium tomato sauce in bids to supply salsa for school lunches and other food assistance programs. The parties disputed whether the CO knew or should have known of the contractor's possible mistake and therefore requested verification of its bids.

No Reasonable Explanation

The board explained price disparity does not necessarily provide constructive notice of a mistake if the circumstances offer reasonable explanations for the disparity. Here, however, the CO should have questioned the contractor's bid prices. Historical pricing data showed an approximately 40-percent difference between the contractor's bid prices and the lowest bid prices in the prior year's solicitations. The CO did not note any specific circumstances that would explain the disparity, and her reference to general circumstances that might cause a contractor to intentionally submit a low bid was not compelling. In addition, a Destination Price Bid Array report indicated the contractor consistently bid significantly less than its competitors on most of the contract line items. The CO attributed the price differences to differences in shipping costs, but this reasoning did not explain the price disparity with respect to all competitors. Either the historical prices or the report should have put the CO on notice of a possible mistake in bid. The fact the contractor's intended price was higher than the next lowest bidder's price did not bar recovery. As allowed under FAR 14.407-4 (b)(2), the contractor sought the difference between its contract price and the next lowest bidders' prices, and its methodology for calculating the difference was reasonable. ( Red Gold, Inc. v. Dept. of Agriculture, CBCA, 93,532)





(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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