TITLE: B-298609, Miramar Construction, Inc., October 31, 2006
BNUMBER: B-298609
DATE: October 31, 2006
******************************************************
B-298609, Miramar Construction, Inc., October 31, 2006
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Decision
Matter of: Miramar Construction, Inc.
File: B-298609
Date: October 31, 2006
Alan Dickson, Esq., Paul C. Burkholder, Esq., and Tammy Hopkins, Esq.,
Epstein Becker & Green, for the protester.
Kerry S. Curtis, Esq., U.S. Army Corps of Engineers, for the agency.
Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Contracting agency's determination to permit bidder to upwardly correct
its apparent low bid lacks a reasonable basis where bidder's explanation
for alleged mistake is illogical and raises questions as to whether a
mistake occurred, and where agency's determination fails to address these
questions and relies on mischaracterizations of the bidder's explanation.
DECISION
Miramar Construction, Inc. protests the proposed award of a contract to
ERS-JV under invitation for bids (IFB) No. W912PL-06-B-0008, issued by the
U.S. Army Corps of Engineers, Los Angeles District, for the removal and
replacement of sewer lagoons in wastewater treatment facilities at the
Yuma Proving Ground in Arizona. Miramar primarily argues that the Army
improperly permitted ERS-JV to make an upward correction to its apparent
low bid.
We sustain the protest.
The Army issued the solicitation on May 15, 2006 as a competitive section
8(a) procurement.[1] Bidders were required to provide a separate lump sum
price for each of two items, a base requirement to construct and repair
existing sewer lagoons at one location, and an option requirement to
perform similar work at another location. Award of a fixed-price contract
was to be made to the responsible bidder that submitted the lowest
responsive bid for the total of both items in the bid schedule. IFB sect.
00010, para. 16.
Four firms submitted bids by the June 21 extended closing date. The
following table shows the prices submitted and the independent government
estimate (IGE):
+---------------------------------------------------------+
| |Base Item |Option Item |Total Bid |
|-----------+--------------+--------------+---------------|
|Firm A |$7,696,000 |$4,519,000 |$12,215,000 |
|-----------+--------------+--------------+---------------|
|Firm B |5,987,980 |4,010,337 |9,998,317 |
|-----------+--------------+--------------+---------------|
|Miramar |6,391,000 |2,976,000 |9,367,000 |
|-----------+--------------+--------------+---------------|
|ERS-JV |4,122,900 |2,758,900 |6,881,800 |
|-----------+--------------+--------------+---------------|
|IGE |7,824,480 |2,786,580 |10,611,060 |
+---------------------------------------------------------+
ERS-JV's apparent low bid was 26.5 percent below Miramar's apparent
second-low bid, and 35.1 percent below the IGE. In light of this pricing
disparity, the contract specialist contacted ERS-JV's director and asked
him to review the bid and confirm the price for both line items. The
contract specialist states that ERS-JV's director told him he thought the
firm had made an error but that he would review the bid more thoroughly
and get back to the agency. Contract Specialist's (CS) Declaration at 2;
Contracting Officer's (CO) Declaration at 2.
The next day, ERS-JV's director asked the contracting officer how to
request withdrawal of the bid because it had made a "significant mistake
in the calculations." CO Declaration at 2. The contracting officer states
that she and the director reviewed the requirements in the Federal
Acquisition Regulation (FAR) and Engineer FAR Supplement (EFARS) for
requesting bid withdrawal, and that she faxed the director relevant pages
from the FAR. Id.
Later that same day, ERS-JV's director faxed the contracting officer a
letter requesting withdrawal of the bid because he had discovered
"arithmetic errors" that materially affected the price. Letter from ERS-JV
to CO, June 22, 2006. Attached to the letter were two undated hard copies
of electronic spreadsheets and an affidavit from the director in which he
claimed responsibility for the "computation of the erroneous amount" in
the original bid. Affidavit of ERS-JV's Director, June 22, 2006, para. 4.
The first spreadsheet was captioned "original," and reflected a total bid
of $6,881,800. In his affidavit, the director stated that this spreadsheet
was used to compute the offered bid, was prepared before bid opening, and
had not been altered since then. The second spreadsheet was captioned
"extended," and reflected a total bid of $8,313,086. In his affidavit, the
director stated that the total bid should have been as shown on this
spreadsheet. The affidavit goes on to provide ERS-JV's only explanation in
the record concerning how this alleged mistake was made.[2]
ERS-JV's "original" spreadsheet is comprised of two sections, one for the
base requirement and one for the option requirement. Each section contains
various line items for the work, such as labor positions and specific
services. In the final column, or "cell," the spreadsheet shows a total
dollar amount for each line item. The total amount is the sum of various
cost elements of the line item, each of which is entered in a separate
cell, displayed horizontally across the line corresponding to the line
item.
In his affidavit, ERS-JV's director states that "[a] mistake was made" in
the line item for [deleted] in both the base and option requirement
sections of the spreadsheet. In the base requirement section, the amount
listed in the final cell for the total dollar amount is [deleted]. The
director states:
This mistake resulted from the positioning of [deleted] in the final cell;
the amount of [deleted] was not a CALCULATED amount as it should have
been. The CALCULATED amount should have been [deleted], as shown on the
"Extended" spreadsheet. [deleted] was our INTENDED bid price for this item
on the [base item] portion of our bid worksheet.
ERS-JV Affidavit, supra, para. 2. In the option requirement section of the
spreadsheet, the amount listed in the final cell for the total dollar
amount is [deleted]. As with the base requirement, ERS-JV's director
states:
This mistake resulted from the positioning of [deleted] in the final cell;
the amount of [deleted] was not a CALCULATED amount as it should have
been. The CALCULATED amount should have been [deleted], as shown on the
"Extended" spreadsheet. [deleted] was our INTENDED bid price for this item
on the [option item] portion of our bid worksheet.
Id.
On June 26, ERS-JV's director asked the contract specialist if there was a
way to remain as the low bidder. The contract specialist states that he
described the procedure outlined in the FAR for permitting the correction
of mistakes before award and told the director to review the requirements
and to ask for correction instead of withdrawal of the bid. CS Declaration
at 2.
On June 27, ERS-JV's director faxed the contract specialist a letter
requesting correction of the bid and canceling its request to withdraw the
bid. The letter states that, after bid opening, the director reviewed the
spreadsheets and discovered "arithmetic and computer data entry errors"
that materially affected the price. Attached to the letter were hard
copies of electronic spreadsheets similar to those earlier submitted (this
time signed and dated), a corrected bid schedule, and copies of the same
affidavit and spreadsheets submitted with the request to withdraw the bid.
Later that day, ERS-JV's director e-mailed the contract specialist an
electronic copy of the spreadsheet he says he used to calculate the bid.
However, the spreadsheet had already been altered to show the "corrected
amounts" and was, as a result, no longer the original electronic
spreadsheet.
The contracting officer analyzed the request for bid correction and
memorialized her analysis in a memorandum sent to the Division Commander
on July 21.[3] On July 27, the Division Commander concurred with the
contracting officer's analysis of the request and authorized an upward
correction of the bid to a total of $8,313,086. In its protest, Miramar
primarily contends that ERS-JV's explanation is irrational, that there is
significant contravening evidence for its claim on the face of the
electronic spreadsheet, and that the agency's rationale for concluding
ERS-JV provided clear and convincing evidence to support its request was
erroneous.
In order to protect the integrity of the procurement process, a bidder's
request for upward correction of a bid after bid opening but before award
may be granted only where the request is supported by clear and convincing
evidence of both the existence of a mistake and the bid actually intended,
and only where the correction would not result in displacing one or more
lower bids. FAR sect. 14.407-3(a); Stanley Contracting, Inc., B-282085,
May 27, 1999, 99-1 CPD para. 104 at 3. The burden is on the bidder to
support such a request with statements, sworn if possible, and all
pertinent evidence, such as the original worksheets and other data used in
preparing the bid, that establishes the existence of the error, the manner
in which it occurred, and the bid actually intended. FAR sect.
14.407-3(g)(2). For upward correction of a low bid, worksheets, including
records of computer-generated software spreadsheets, may constitute clear
and convincing evidence if they are in good order and indicate the
intended price, and there is no contravening evidence. Asbestos Control
Mgmt., Inc., B-279521, June 23, 1998, 98-1 CPD para. 169 at 5. Our Office
will not question an agency's determination regarding the sufficiency of
the evidence unless it lacks a reasonable basis. Id.
We conclude from the record that the agency's determination to allow
ERS-JV to correct its bid lacks a reasonable basis. Our concerns are
twofold. First, the bidder's explanation is illogical in view of the way
its electronic spreadsheet was structured, and raises questions as to
whether a mistake occurred at all. Second, the agency's rationale for
concluding that clear and convincing evidence supported the bidder's
request not only fails to address these questions, but relies on
mischaracterizations of ERS-JV's explanation.
ERS-JV prepared its bid using a computer-generated spreadsheet that
contained imbedded formulas to automatically calculate various costs, as
well as the total dollar amount for each line item. For the [deleted] line
item under both the base and option requirements, the spreadsheet was set
up so that the manual entry of figures in the cells for estimated
quantity, unit of measure, and unit price would automatically generate and
insert figures in the cells for unit overhead cost, total overhead cost,
total direct cost, and total dollar amount. When these first three figures
are manually entered into the base requirement section of the spreadsheet,
the total dollar amount in the final cell--[deleted]--is automatically
calculated and inserted. Likewise, when these first three figures are
manually entered into the option requirement section of the spreadsheet,
the total dollar amount in the final cell--[deleted]--is automatically
calculated and inserted. These figures result from operation of the
spreadsheet's imbedded formulas.
ERS-JV's explanation for its alleged mistake is as follows: its director
ignored the formulas set up in the spreadsheet and overrode the
automatically "calculated" total amount of [deleted] for the base
requirement by inserting, instead, a "non-calculated" (that is, not
calculated by the formulas) amount of [deleted]--but that he actually
intended for the amount to be the "calculated" amount of [deleted], the
amount he overrode. Likewise, the director ignored the formulas set up in
the spreadsheet and overrode the automatically "calculated" amount of
[deleted] for the option requirement by inserting, instead, a
"non-calculated" amount of [deleted]--but that he actually intended for
the amount to be the "calculated" amount of [deleted], the amount he
overrode.
In view of the automated features of the spreadsheet, which are readily
apparent from its electronic version, this explanation is illogical and
raises several questions ERS-JV does not answer. The ERS-JV director does
not explain why he ignored the formulas set up in the spreadsheet and
overrode the automatically calculated figures. He does not explain the
discrepancy between that intentional act and his current claim that the
figures he overrode, calculated by the formulas he ignored, were, after
all, the intended figures. He does not explain the derivation of these
non-calculated figures or why he inserted these particular figures. He
does not explain why he did not realize an error had been made as soon as
he inserted the "non-calculated" amounts, even though, with respect to the
option requirement, this action automatically resulted in insertion of a
negative number in the total direct cost cell, in plain sight next to the
total dollar amount cell on the computer screen before him. The questions
raised by ERS-JV's incomplete explanation cast doubt on its claim that
there was a mistake at all.
The agency's determination that ERS-JV's request for bid correction was
supported by clear and convincing evidence fails to address these
questions and, in fact, relies on mischaracterizations of ERS-JV's
explanation.
In her memorandum to the Division Commander, the contracting officer
states:
19. The spreadsheet program . . . allowed a person to add expenses
inside the summation cell. However, if an inaccurate expense is
added the end result or [total dollar amount] will also be inaccurate.
20. When ERS-JV realized it needed to separate and submit a price for
both [requirements] it manually calculated each individual site to
arrive at a sub total.
21. The evidence is clear and convincing that ERS-JV made a mistake
. . . . ERS-JV inadvertently inserted an inaccurate expense in the
[total direct cost] cell titled [deleted] which generated the mistake
in the [total dollar amount] column. . . .
CO Memorandum, July 21, 2006, paras. 19-21.
The contracting officer attributes to ERS-JV a rationale for its
action--needing to separate and submit prices for both requirements--and
an action--inadvertently inserting inaccurate expenses in the total direct
cost cells--that the bidder itself does not claim. ERS-JV never provided a
rationale for its action, only claimed to have inserted figures into the
total dollar amount cells, and is silent as to whether this action was
inadvertent or intentional. The contracting officer's version of ERS-JV's
explanation is wholly unsupported by the record.[4]
The District Commander's analysis relies upon equally erroneous
characterizations:
4. . . . The printout of the worksheet reveals how the erroneous [base
requirement] figure for direct costs was transposed incorrectly by a
factor of 100: the cost should have been [deleted] multiplied by
[deleted], or [deleted] instead of the [deleted] entered onto the
worksheet. Review of the worksheet in question supports ERS-JV's assertion
of a simple decimal error.
. . . . .
6. . . . A value of [deleted] was listed in place of the accurate total of
[deleted]. This is the "decimal error" noted above.
. . . . .
14. In the instant case it is easy to determine both the existence of a
mistake and the actual intent of the bidder. An examination of the
original ERS-JV worksheets discloses the transposition error made by the
bidder. It mistakenly multiplied [deleted] by [deleted] with a resulting
total of [deleted] rather than the correct amount of [deleted]. Thus it is
abundantly clear that a mistake was made. Likewise, it is a simple matter
to ascertain the true intended total to be added to the bid, [deleted]
rather than [deleted]. The analysis easily explains both how the error was
made and the correct price intended by the bidder. Therefore, the evidence
provided by the bidder satisfies the clear and convincing standard.
Division Commander's Memorandum, July 27, 2006, paras. 4, 6, 14.
The Division Commander's assertion that ERS-JV made a multiplication error
that resulted in its entering the wrong figure into the total direct cost
cell for [deleted] in the base requirement is not supported by the
record.[5] ERS-JV does not claim that its mistake resulted from a
multiplication error, a transposition error, or a decimal error,[6] and it
does not claim that its mistake resulted from entering a figure into the
total direct cost cells.
It appears that the Division Commander has confused the alleged cause of
the error with its effect. When ERS-JV manually entered the estimated
quantity, unit of measure, and unit price for the [deleted], the formulas
imbedded in the spreadsheet should have automatically calculated and
inserted figures into the remaining cells, including the cells for total
direct costs--[deleted] for the base requirement and [deleted] for the
option requirement--as well as the cells for total dollar amounts--the
figures ERS-JV now claims were the intended figures. However, when ERS-JV
manually inserted "non-calculated" figures into the total dollar amount
cells for [deleted]--the act it claims was the cause of the alleged
mistake--the formulas automatically recalculated and inserted different
figures into the cells for total direct costs--[deleted] for the base
requirement and [deleted] for the option requirement. This "cause and
effect" is clearly visible when the electronic version of the spreadsheet
is reviewed.
The Army's erroneous analysis of ERS-JV's alleged mistake may have led it
to focus on the fact that, when the "logic of the spreadsheet is used,"
the intended bid for the [deleted] line items becomes evident. AR Legal
Memorandum at 10. That is, if the spreadsheet's formulas are permitted to
function, the resulting figures are those ERS-JV now claims were the
intended figures. However, the Army's focus should have been on the fact
that ERS-JV ignored the "logic of the spreadsheet" when it inserted
"non-calculated" figures into the total dollar amount cells instead of
permitting the formulas to function, and failed to provide any reason for
doing so. The Army's erroneous analysis, which goes beyond what ERS-JV has
offered as an explanation, cannot reasonably support a finding that ERS-JV
provided clear and convincing evidence of the mistakes and the actual
intended bid to support its request for bid correction.
We conclude that the Army improperly permitted ERS-JV to upwardly correct
its bid.[7] We recommend that the Army permit ERS-JV to withdraw its bid
if otherwise appropriate, and make award to Miramar if otherwise
appropriate. We also recommend that Miramar recover the costs of filing
and pursuing its protest, including reasonable attorneys' fees. Miramar
should submit its certified claim, detailing the time expended and costs
incurred, for such costs directly to the contracting agency within 60 days
of receiving this decision. 4 C.F.R. sect. 21.8(d)(1) (2006).
The protest is sustained.
Gary L. Kepplinger
General Counsel
------------------------
[1] Section 8(a) of the Small Business Act authorizes the Small Business
Administration to contract with other government agencies and to arrange
for the performance of those contracts via subcontracts awarded to
socially and economically disadvantaged small businesses. 15 U.S.C. sect.
637(a) (2000).
[2] On June 23, ERS-JV's director sent the Army another affidavit to
explain a different error on the "original" spreadsheet that had not
affected the original offered price. In view of our decision with respect
to the originally-claimed mistake, we need not address this second alleged
mistake.
[3] Under EFARS sect. 14.407-3(e)(1)(i), requests for bid correction are
to be submitted to the Division Commander for determination.
[4] The legal opinion attached to the contracting officer's memorandum
asserts,
"ERS-JV's sworn statement that it manually mis-calculated the figures for
the total direct cost of [deleted] is reasonable . . . ." Assistant
District Counsel's Memorandum, July 21, 2006, para. 9. In his affidavit,
ERS-JV's director does not make this statement.
[5] The Division Commander's claim that ERS-JV "mistakenly multiplied" the
estimated quantity of [deleted] by the unit price for a total of [deleted]
rather than the corrected amount of [deleted] is also confusing, as his
explanation for the mistake is that ERS-JV inserted [deleted] into the
total direct cost cell for the base requirement, not [deleted]. In fact,
the figure of [deleted] appears in a different cost cell and was not
revised in the bidder's "extended" spreadsheet.
[6] The Division Commander attributes the insertion of [deleted] as the
total cost for [deleted] for the base requirement instead of [deleted] to
ERS-JV's "assertion" of a "simple decimal error." ERS-JV makes no such
assertion--the firm provides no explanation for its actions. Moreover,
while one can see how a decimal error might occur if the spreadsheet's
formula did not automatically insert the "correct" figure of [deleted],
there is no such argument to be made for the alleged mistake in the option
requirement section of the spreadsheet.
[7] Miramar also argues that the agency improperly determined that ERS-JV
was a responsible bidder. Since we sustain the protest on Miramar's first
basis of protest, we need not reach its second.