Government Contracts Monitor
A “Spicy” Decision by the CBCA Clarifies the Role of a Contracting Officer
August 2, 2012
A recent food service industry decision from the Civilian Board of Contract Appeals provides some guidance regarding how a Contracting Officer should deal with potential mistakes in the bid process.
In Red Gold, Inc. v. Dep’t of Agriculture, CBCA 2639 (July 6, 2012), the Board held that a unilateral mistake by the contractor was excusable and awarded $253,608. In connection with a contract to provide salsa to the USDA for federal school lunches and other food assistance programs, Red Gold submitted a winning bid for 92% of the salsa called for under the contract, specifically 95,760 cases of salsa. The CO did not hold a post-award conference or request verification of any bid pricing, determining that the bids were “fair and reasonable,” and she did not see any “apparent and obvious mistakes.”
After the contract began, Red Gold realized that it was losing money on the contract and had made a mistake – the price they used to bid for salsa was actually for low sodium tomato sauce. The company notified the CO of the mistake, and sought to remedy the pricing with an accurate price for their salsa that would not have been the low bid on the contract. The CO denied the request, stating that the USDA was only permitted to adjust the price if the intended or corrected price was lower than that of the second bidder.
The Board set forth five factors a contractor must meet to obtain a remedy in a unilateral mistake case – (1) a mistake of fact occurred prior to the contract award; (2) the mistake was a clear-cut clerical or mathematical error or a misreading of the specifications; (3) prior to the award, the Government knew or should have known that a mistake had been made; (4) the Government did not request bid verification; and (5) proof of the intended bid.
The third factor, the government’s knowledge, was the only one in dispute. The Board held that the CO should have been alerted to a possible mistake in the bid when she reviewed the historical pricing data and a price bid array report. The historical pricing data reflected a 40% drop in price from most of the previous salsa procurements, which the Board categorized as “a sharp drop.” This drop “should have caused a reasonable CO to question Red Gold’s bid prices,” and at a minimum, should have requested verification of Red Gold’s bid prior to award.
As for the damage award, the Board granted Red Gold’s request for the difference between its original price in the bid and the amount of the next lowest acceptable bid in the original invitation. The Board rejected the CO’s reasoning that she could not provide relief to Red Gold because its revised price was higher than the second lowest bidder. Rather, the Board held that it sought to place the government in the same place had it recognized Red Gold’s bid and permitted it to withdraw so it permitted the upward price movement to that of the second lowest bidder.
This case demonstrates that government contracting requires a diligent CO to address issues in the pre-award phase to avoid issues such as these and that innocent mistakes by contractors can be remedied under certain circumstances, even when the mistake is the difference between low sodium tomato sauce and salsa.
The entire Board opinion may be found here.
Brian Stolarz is the attorney responsible for the content of this article.