Chris Berg, Inc. v. United States

• Decision Date: 02 October 1970
• Docket Number: No. 235-68.,235-68.
• Parties: CHRIS BERG, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

426 F.2d 314 (1970)

CHRIS BERG, INC. v. The UNITED STATES.

No. 235-68.

United States Court of Claims.

May 15, 1970.

As Amended October 2, 1970.

Bruce T. Rinker, Seattle, Wash., for plaintiff. Stuart G. Oles, Seattle, Wash., attorney of record; Allen, DeGarmo & Leedy, Seattle, Wash., of counsel.

Thomas W. Petersen, Washington, D. C., with whom was Asst. Atty. Gen. William D. Ruckelshaus, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

NICHOLS, Judge.

Plaintiff corporation, a construction contractor, submitted a bid on a Government contract in an amount which reflected an error in computing its allocable costs. Defendant upon opening the bid suspected the mistake and plaintiff has established it occurred, but plaintiff refused to rescind and defendent refused to increase the bid price. Plaintiff signed the contract, N 62766-68-C-0001, as tendered, and performed it but brings this suit for the difference, as it says, between what it bid and what it would have bid, but for the mistake. The case is before us on cross motions for summary judgment, with documentation. There is no issue of material fact and plaintiff is entitled to recover.

The United States Navy sent plaintiff its invitation to bid on the construction or restoration of various facilities in the Trust Territory of the Pacific Islands. The mistake in the cost calculations resulted from a misplaced decimal in calculating a roofing job, and the omission of one of the original estimate sheets. The amount claimed totals $41,121; made up of $25,633 for the omitted sheet, $11,046 for the misplaced decimal, "Fee" at $4,035, and all risk Bond at one percent — $407. Plaintiff bid $616,000. There were three other bids ranging from $732,800 to $1,117,000. Defendant's estimate was $707,000. After bid opening the contracting officer suspected that plaintiff had made an error and requested review and reconfirmation. Plaintiff checked its figures and discovered the errors above-mentioned, the reality of which is not in dispute. The worksheets show that the computation before the bid resulted in a figure, including markup, of $618,128, reduced to $616,000 for bidding purposes. Whether this reduction of $2,128 was a "rounding out" or a "gross reduction" is a semantic issue much debated by the parties. It was, at any rate, a reduction of approximately 1/3 of one percent in the bid price.

The dispute resulted, as stated, from the fact that plaintiff wanted to reform its bid price while defendant would consider only recision. Defendant said that "NAUFACENGCOM policy" did not permit increases in a bid amount because of mistakes in the original calculation. Plaintiff finally signed the contract in the amount bid, reserving its request for modification in an accompanying letter. Plaintiff says it did not want to create bad relations with defendant, having worked for it on various other jobs, and being subject to duress and coercion via the bid bond. There is no particular duress evident in the record. We do not deem that under the facts stated, duress is a relevant issue, and we do not consider it further.

Plaintiff performed the contract, meanwhile pursuing its administrative remedies. Apparently the instant claim is the only unsettled item under the contract. The last stop of the case before here was at the General Accounting Office. The Assistant Comptroller General held that the Navy violated the applicable Armed Services Procurement Regulation (ASPR hereinafter) set forth below in refusing to consider evidence of error when submitted for the purpose of increasing the bid price. But, he held, the evidence before him showed a "gross reduction" of $2,138, which made it difficult to determine to what extent the bidder would have relied on the correct costs to bid any specific amount higher than it did. "In view thereof the immediate claim * * * is for denial." B-163284, reported 47 Comp. Gen. 507 (1968).

The applicable regulations, AS PR 2-406, Mistakes in Bids and ff. are set forth as appendix A. It appears, and we assume, that the Navy correctly held this was not an Apparent Clerical Mistake under 2-406.2 since that covers only those mistakes that can be seen to be such without information from any source except the face of the bid itself. The illustrations make that clear.

Under 2-406.3 Other Mistakes there must be "clear and convincing evidence," establishing the existence of a mistake, to allow the bidder to rescind. If he wants to modify, and can show the bid actually intended, and the correction would not "displace one or more lower bids," he may be allowed to do so.

Defendant urges here that the Government has an option and can always restrict the relief to recision, not reformation, under these circumstances. It does indeed seem clear by 2-406.3(a) (2) that a mistaken bidder may not rescind even though he wants to, if the Government prefers reformation and decides it can determine what the bid would have been and that it is still the low one. That is, we suppose, to obtain for the Government the benefit of what is after adjustment, still the best price offered. In the case of a bidder whose election is reformation, not recision, the ensuing provisions in (a) (3) offer the Government no corresponding option to rescind unless clear and convincing evidence of what the bid would have been is not forthcoming. Here too, policy seems to favor reformation over recision, no doubt for the same reason. We have the high authority of the Comptroller General, cit. supra, that a policy of insisting upon recision only in such a case is contrary to ASPR. Thus we do not sustain defendant's argument on this point.

Defendant does, however, agree with the Comptroller General that we are concerned with a "gross reduction," not "rounding off." It makes the startling assertion that a reduction in the bid from $618,128 to $615,000 or $610,000 would be more acceptable than $616,000 as a "rounding off."

The problem is to determine what constitutes "clear and convincing evidence" of what the bid would have been. Apparently the bidder's own self-serving statement is not necessarily for acceptance. A "gross reduction" refutes him, as the thinking seems to be, because it shows he is giving controlling weight to the possibility he may be underbid. Such a person, on correcting upward an error in his cost estimates, would be still more worried about other bidders and would tend to shave his bid even more. Thus the probable bid on corrected costs would be uncertain over a wide range of possibilities.

This reasoning cannot be carried too far. Even if the original bid is computed in the exact amount of the mistaken estimated costs plus usual markups, there remains some uncertainty whether a corrected higher bid would throw the bidder into a panic about losing the award to competitors. The Navy command, as we understand it, takes the position that this uncertainty always precludes reform. The trouble with this view is that it effectively nullifies the regulation and therefore, of necessity, must misconstrue it. One must be willing to believe the evidence is "clear and convincing" on the basis of a reasonable probability that the markup on the higher costs would be computed in the same way it was on the mistaken lower ones.

It is not reasonably probable that a bidder who was primarily concerned about losing the award to competitors would meet the danger by a bid reduction of but 1/3 of one percent. One would have to be a better mathematician than this court to calculate just how much this would add to his chances, but surely the improvement would be trifling. Accordingly, we think this reduction is de minimis and for present purposes the same as no reduction at all. Moreover, we think an uncertainty within a relatively narrow range is not inconsistent with "clear and convincing evidence" of what the bid would have been. Plaintiff proposes that the "rounded off" figure of $616,000 be reformed by adding the "rounded off" figure of $41,000, making a reformed contract price of $657,000, and this suggestion we adopt as it puts plaintiff at the bottom of the range of uncertainty. Chernick v. United States, 372 F.2d 492, 497, 178 Ct.Cl. 498, 507 (1967). We do not necessarily adopt plaintiff's semantics as we think it legally irrelevant whether these small adjustments are known as "rounding off" or by some other name. We add the further caution that in deeming a bid reduction of 1/3 of one percent inconsequential we have taken into account that the work was to be done not at home but in the Trust Territory, where wide differences among the bids were predictable and actually occurred.

We turn now to defendant's principal argument, which builds on Massman Contruction Co. v. United States, 60 F.Supp. 635, 102 Ct.Cl. 699, cert. denied 325 U.S. 866, 65 S.Ct. 1403, 89 L.Ed. 1985 (1945). It is that there is no basis for reformation because plaintiff knew of the mistake and signed the contract anyway. In that case, as here, the plaintiff had contracted at the bid price after defendant had refused to let it correct a mistake. It alleged bid bond coercion, as here, and reluctance to alienate a valued customer, as here, had accompanied its signature, as here, with an emphatic written protest.

The court thought that the Massman Company was not free from negligence in making the mistake it did. That is a factor of diminished importance today. In our recent decision in Ruggiero v. United States, 420 F.2d 709, 713, 190 Ct. Cl. 327 (decided January 23, 1970), slip op. at p. 7, we pointed out as a characteristic of mistaken bid cases in which relief was granted, both before and after Massman that just about all the bidders were "guilty of egregious blunders."

A more important and, we think, controlling distinction is that there was not any ASPR at the Massman date, or any other regulation called to the court's attention. There was nothing to...