BNUMBER: B-265937
DATE: January 17, 1996
TITLE: CRK-JVC/Shockley Joint Venture
**********************************************************************
Matter of:CRK-JVC/Shockley Joint Venture
File: B-265937
Date: January 17, 1996
John Lukjanowicz, Esq., Oles Morrison & Rinker, for the protester.
Christopher M. Bellomy, Esq., Department of the Navy, for the agency.
Christine Davis, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
An agency reasonably found that the protester had not presented clear
and convincing evidence that it mistakenly failed to add certain tax
and insurance prices to its total base bid price where the protester's
mistake claim was initially based on bid worksheets that did not form
the basis for the bid, and the submitted documentation and
explanations in support of the mistake claim contain unexplained
discrepancies and uncertainties as to the intended bid.
DECISION
CRK-JVC/Shockley Joint Venture (CRK) protests the decision of the
Department of the Navy, Naval Facilities Engineering Command, to deny
its request to correct a mistake in its low bid under invitation for
bids (IFB) No. N62742-95-B-1305.
We deny the protest.
The IFB sought the design and construction of a Navy Exchange
Distribution Center at the Naval Station, Pearl Harbor, Hawaii. The
IFB requested prices for a base bid item covering the basic project
and for an additive item--the construction of a mezzanine.
The protester submitted the lowest of seven bids on the June 27, 1995,
bid opening date. The lowest three bids and the government estimate
were as follows:
Base Bid Additive Item Total Bid
CRK $10,948,000 $730,000 $11,678,000
Bodell Construction$12,205,000 $605,000 $12,810,000S&M
Sakamoto, Inc. $12,492,000 $540,000 $13,032,000
Government Estimate$12,500,000 $725,000 $13,225,000
On June 28, the Navy asked CRK to confirm its bid, given that the
other bids and the government estimate were significantly higher. On
June 30, CRK confirmed its bid. On July 6, CRK retracted its
confirmation and informed the Navy that its bid contained a mistake.
CRK claimed its base bid was understated by $492,175, consisting of
$39,441 for liability insurance and $452,734 for Hawaii Use Tax. CRK
stated that it meant to include these amounts in its base bid, but a
computer programming error had the effect of excluding these amounts.
The requested correction would make CRK's bid $12,170,175, or 5
percent lower, than the next low bid.
On July 12, CRK submitted the bid worksheets and other back-up data
used to prepare its bid, including a series of computer
spreadsheets.[1] CRK submitted 11 base bid spreadsheets and 10
additive spreadsheets generated for this project. Each base bid
spreadsheet consistently excluded the prices for the liability
insurance and Hawaii Use Tax items from the total base bid amount. In
an affidavit, the responsible CRK employee explained how the exclusion
of these prices stemmed from a computer programming oversight.[2]
CRK generated all spreadsheets before bid opening, except for one base
bid spreadsheet that bore a computerized "4:14 PM" notation.[3] The
amount claimed by CRK ($39,441 for liability insurance and $452,734
for Hawaii Use Tax) appeared under these line items in the 4:14 p.m.
spreadsheet. Another spreadsheet, which bore a "3:26 PM" notation,
reflected $39,773 for liability insurance and $458,411 for Hawaii Use
Tax.
CRK's actual base bid of $10,948,000 did not appear on any of the
submitted spreadsheets. The "Total Bid" amount is $10,983,493 on the
4:14 p.m. spreadsheet ($35,493 more than the actual bid) and
$11,120,906 on the 3:26 p.m. spreadsheet ($172,906 more than the
actual bid). CRK's lead team member explained in an affidavit that
the actual bid submitted was based on the 3:26 p.m. spreadsheet. The
3:26 p.m. spreadsheet contains a handwritten notation, "cut
(177,906)," which the team member stated he calculated and inscribed
on the spreadsheet.[4] The team member stated that he then
arbitrarily shaved $5,000 from the handwritten "cut" amount and
directed a $172,906 reduction to the 3:26 p.m. total base bid amount,
which yields the submitted base bid of $10,948,000.
The base bid spreadsheet program contained individual line items for
taxes, insurance, overhead, bonds, and profit, including liability
insurance and Hawaii Use Tax. In contrast, the additive spreadsheet
program did not itemize these indirect costs, but contained a markup
line item to account for them. A markup of 10.43 percent appears on
CRK's 3:44 p.m. additive spreadsheet.[5] This same 10.43-percent
markup figure also appears on CRK's 3:26 p.m. and 4:14 p.m. base bid
spreadsheets in an inactive cell (i.e.,an item not actually used to
calculate the total base bid). The 10.43-percent base bid markup is
the ratio between the total indirect project costs (taxes, insurance,
overhead, bonds, and profit) and the total direct project costs;
however, the Hawaii Use Tax and liability insurance items are not
included in the 10.43-percent base bid markup.[6]
On August 7, the Navy's contract specialist asked the protester to
clarify perceived ambiguities in the evidence, in particular, the
apparent pricing discrepancies between the 3:26 p.m. and 4:14 p.m.
spreadsheets, and between the base bid and additive spreadsheets. The
contract specialist asked which base bid spreadsheet formed the basis
for CRK's bid and its mistake claim, and why the Hawaii Use Tax and
liability insurance prices differed between the 3:26 p.m. and 4:14
p.m. spreadsheets. The contract specialist also asked the protester,
"[w]hy is there no Hawaii Use Tax and Liability Insurance for [the
additive bid item]?"
On August 8, CRK replied that the 3:26 p.m. spreadsheet was the basis
for its bid, and that the 4:14 p.m. spreadsheet, on which the mistake
claim was based, was created after bid opening to highlight some
revised subcontractor quotes, including one quote received after bid
opening. The protester explained that the Hawaii Use Tax and
liability insurance prices fluctuated between the spreadsheets because
they were percentages of other variable prices, such as labor or
subcontract costs. CRK also stated that, although the base bid
mistakenly omitted the Hawaii Use Tax and liability insurance prices,
the additive bid properly encompassed these costs through the
application of a 10.43-percent markup.
On August 10, the contracting officer denied CRK's request for bid
correction, citing various inconsistencies in the evidence. For
example, the contracting officer was concerned that CRK purportedly
based its bid on the 3:26 p.m. spreadsheet, but sought correction for
prices appearing on the 4:14 p.m. spreadsheet, which were not
traceable to the actual base bid submitted. Moreover, the contracting
officer questioned, in view of CRK's explanation that the Hawaii Use
Tax and liability insurance costs were included in the 10.43-percent
additive markup, but were not in the base bid markup, whether CRK
intended to omit the Hawaii Use Tax and liability insurance from its
markup for both the base and additive bid. Although the contracting
officer denied CRK's request for correction, he offered CRK the
opportunity to withdraw its bid, given that it was much lower than the
government estimate.
On August 11, CRK asked the contracting officer to reconsider his
decision. CRK said that it mistakenly requested an upward adjustment
for amounts appearing on the 4:14 p.m. spreadsheet, instead of the
amounts appearing on the 3:26 p.m. spreadsheet. CRK also said that
the contracting officer improperly compared the base bid and additive
bid in resolving the mistake claim, "[s]ince we have not requested any
bid correction on the [additive bid], and since the [additive bid] has
no relevancy to the well documented error made on [the base bid]."
The contracting officer declined to reconsider his decision, stating
that CRK's letter "reinforces our conclusion that the evidence you
provided did not establish clearly and convincingly the mistake and
the actual intended bid." On August 16, CRK stated that it would
accept the contract at its mistaken bid price, but would protest the
agency's denial of its request for correction. This protest followed.
CRK alleges that the Navy unreasonably denied its request for bid
correction. CRK claims that the Navy should have allowed an upward
adjustment of its bid in the amount of $498,184. This amount
corresponds with the Hawaii Use Tax and liability insurance items on
CRK's 3:26 p.m. base bid spreadsheet.
In order to protect the competitive bid system from abuse, the Federal
Acquisition Regulation (FAR) imposes a high standard of proof--clear
and convincing evidence--upon bidders seeking upward correction of
their bids after bid opening but before award. The bidder must submit
clear and convincing evidence that a mistake was made, the manner in
which the mistake occurred, and the intended price. FAR sec.
14.406-3(a). The exact amount of the intended bid need not be
established, provided that there is clear and convincing evidence that
the amount of the intended bid would fall within a narrow range of
uncertainty and would remain low after correction. Great Lakes Dredge
& Dock Co., B-248007.2, Sept. 3, 1992, 92-2 CPD para. 151. Workpapers,
including records of computer-generated software
spreadsheets/worksheets, may constitute part of that clear and
convincing evidence, if they are in good order and indicate the
intended bid price, and there is no contravening evidence. RJS
Constructors, B-257457, Oct. 7, 1994, 94-2 CPD para. 130; Northwest
Builders, 67 Comp. Gen. 278 (1988), 88-1 CPD para. 200; Bush Painting,
Inc., B-239904, Aug. 30, 1990, 90-2 CPD para. 188.
An agency may not permit the correction of a mistake asserted after
bid opening, but before award, if the bidder's evidence fails to meet
the high standard of proof established by FAR sec. 14.406-3(a),
notwithstanding the good faith of the parties. Three O Constr.,
S.E., B-255749, Mar. 28, 1994, 94-1 CPD para. 216. Furthermore, because
the contracting agency is vested with authority to correct mistakes,
and because the weight to be given evidence in support of an asserted
mistake is a question of fact, we will not disturb an agency's
decision concerning bid correction unless there was no reasonable
basis for the decision. Id.; Lash Corp., 68 Comp. Gen. 232 (1989),
89-1 CPD para. 120; Tri-State Consultants, B-250700, Dec. 22, 1992, 92-2
CPD para. 433.
The question facing the agency in this case was whether the protester
had clearly and convincingly established that its base bid mistakenly
omitted the costs for the Hawaii Use Tax and liability insurance and,
if so, what the intended bid price would have been. The record
reflects that the agency weighed the protester's evidence and
discovered various ambiguities and contradictions that, in the Navy's
view, precluded bid correction. Based on our review of the record, we
cannot say that the agency lacked a reasonable basis in concluding
that the protester's evidence was less than clear and convincing.
First, the protester based its mistake claim on two different base bid
spreadsheets, neither of which reflected CRK's actual base bid of
$10,948,000. Although the protester submitted an affidavit to explain
how certain manual adjustments to the 3:26 p.m. spreadsheet yielded
the actual base bid, the protester maintained until its mistake
request was denied that its bid was understated by amounts appearing
on the 4:14 p.m. spreadsheet. These varying explanations reasonably
caused the agency to question the relevance of the 4:14 p.m.
spreadsheet to the protester's mistake claim and bid, and to compare
the protester's spreadsheets for a consistent pattern of pricing. The
agency's examination indicated certain weaknesses in the protester's
evidence and brought other inconsistencies to light. For example, the
agency considered the fact that the protester did not reduce the 3:26
p.m. bid according to the manual notation, "cut (177,906)"; that the
4:14 p.m. spreadsheet included a revised subcontractor quote
(assertedly received after bid opening) not encompassed by the "cut
(177,906)"; and that the 4:14 p.m. spreadsheet only partially
documented the price reductions allegedly comprising the "cut
(177,906)."
The protester argues that even though it based its bid correction
request on amounts appearing in the 4:14 p.m. spreadsheet, the agency
should have known that the 4:14 p.m. spreadsheet was irrelevant and
should have confined its review to the 3:26 p.m. spreadsheet. The
protester notes that it clarified for the Navy on August 8 that the
4:14 p.m. spreadsheet was created after bid opening to highlight some
revised subcontractor quotes and that the 3:26 p.m. spreadsheet was
the basis for its bid. What is troubling, however, is that CRK had
been alerted to the discrepancy in its bid correction request, yet
inexplicably did not revise its request to reflect the 3:26 p.m.
amounts until the agency, citing (among other things) confusion over
the competing spreadsheets, denied the correction request. By that
time (approximately a month and a half after bid opening), it was
understandable that the agency lacked confidence in the reliability of
the spreadsheets to support the mistake claim. In our view, the
protester is solely responsible for the agency's misgivings about how
CRK calculated its bid price and which documents were relevant to
those calculations. See Three O Constr., S.E., supra.
We also find that the agency reasonably questioned whether the
omission of the Hawaii Use Tax and liability insurance amounts from
CRK's base bid was inadvertent or intentional, in view of CRK's
inconsistent explanation of its base bid and additive bid pricing.
Although CRK applied the same markup of 10.43 percent to both its base
and additive bid, the base bid markup, as calculated from the
individual indirect cost line items, excluded the amounts for the
Hawaii Use Tax and liability insurance. Had those amounts been
included in the markup figure, as the protester asserts they should
have been but for the programming error, CRK's base bid markup would
have been 15.4 percent. Yet the protester continues to confirm that
the 10.43-percent additive markup covers the Hawaii Use Tax and
liability insurance costs.[7] Moreover, the protester has not
explained why the 10.43 percent markup covered the costs for the
Hawaii Use Tax and liability insurance for the additive bid, but not
the base bid.
CRK argues that the agency should not have considered this perceived
inconsistency because CRK did not allege an error with respect to the
additive markup. Although it is possible that the protester's markup
strategy for the additive item may have had little or no relation to
its markup strategy for the base bid item, the record contains no
explanation to this effect. See generally Franco, B-214124, May 1,
1984, 84-1 CPD para. 488. As the record stands, the protester has vouched
for the 10.43-percent markup and because this figure demonstrably
excludes the Hawaii Use Tax and liability insurance prices in the base
bid, the agency could reasonably conclude that the exclusion of these
prices from the base bid may have been intentional. See Gunco, Inc.,
B-238910, July 17, 1990, 90-2 CPD para. 46.
CRK argues that, if it had intended to exclude the Hawaii Use Tax and
liability insurance amounts from the base bid, it would not have
bothered to itemize them on the base bid spreadsheet. Although we
agree that the discrepancy between the inclusion of the amounts for
Hawaii Use Tax and liability insurance constitutes evidence of a
mistake, we cannot say that the Navy lacked a reasonable basis for
finding that the clear and convincing evidence required for bid
correction was not present, given the significant and substantially
unexplained discrepancies and uncertainties in CRK's supporting
documentation and explanations. See Great Lakes Dredge & Dock Co.,
supra; Three O Constr., S.E., supra.
The protest is denied.
Comptroller General
of the United States
1. CRK also submitted affidavits by members of its bidding team, who
attested to the authenticity and completeness of the bid documents and
explained how the bidding error occurred.
2. According to the affidavit, the problem began when the employee
created the base-bid spreadsheet for this project by modifying a
template spreadsheet. The employee added to the template spreadsheet
a Hawaii Use Tax line item and reprogrammed a "dummy" liability
insurance line item. The employee explained that, when he modified
the template spreadsheet, he neglected to enter the necessary codes to
cause the Hawaii Use Tax and liability insurance amounts to be added
into the total base bid amount.
3. The time and date notations on CRK's spreadsheets were based on
Pacific Daylight Time. Bid opening was 1 p.m. Hawaii Standard Time,
which corresponds with 4 p.m. Pacific Daylight Time.
4. According to the affidavit, the "cut" resulted from the following
bid changes: (1) lower subcontractor quotes for the base bid amounting
to an overall $135,315 reduction; (2) adjustments to the additive
bid--which had already been submitted to CRK's Honolulu representative
based on a 3:12 p.m. additive spreadsheet--amounting to an overall
$25,000 reduction; (3) the application of a 10.4-percent markup to the
foregoing items, amounting to a $16,672 reduction; and (4) and an
additional $918 reduction so that the base bid would be a round
figure.
5. The protester did not allege an error with respect to the additive
bid.
6. A markup of 10.46 percent appears on CRK's 3.12 p.m. additive
spreadsheet, the asserted basis for CRK's additive bid. The 10.46
figure corresponds with the ratio calculated from prices appearing on
an earlier base bid spreadsheet (3:14 p.m.).
7. CRK advised the Navy on August 8, "[o]ur evaluation of [the
additive] bid item prior to the bid time and the markup amount applied
satisfied us that all the itemized costs, including Hawaiian Use Tax
and liability insurance were adequately covered." CRK has maintained
this position throughout the course of this protest.